Exhibit 4
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AGREEMENT AND PLAN OF MERGER
among
BREP IV HOTELS HOLDING L.L.C.,
BREP IV HOTELS ACQUISITION L.L.C.
and
PRIME HOSPITALITY CORP.
Dated as of August 18, 2004
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TABLE OF CONTENTS
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ARTICLE I THE MERGER...........................................................................1
SECTION 1.01. The Merger............................................................1
SECTION 1.02. Closing...............................................................1
SECTION 1.03. Effective Time........................................................1
SECTION 1.04. Effect of the Merger..................................................2
SECTION 1.05. Limited Liability Company Agreement...................................2
SECTION 1.06. Directors and Officers................................................2
SECTION 1.07. Alternative Structure of Merger.......................................2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..................................3
SECTION 2.01. Conversion of Securities..............................................3
SECTION 2.02. Exchange of Certificates..............................................3
SECTION 2.03. Stock Transfer Books..................................................5
SECTION 2.04. Company Stock Options.................................................5
SECTION 2.05. Dissenting Shares.....................................................5
SECTION 2.06. Debt Offer............................................................6
SECTION 2.07. Non-Foreign Status....................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................7
SECTION 3.01. Organization and Qualification; Subsidiaries..........................7
SECTION 3.02. Certificate of Incorporation and Bylaws...............................8
SECTION 3.03. Capitalization........................................................8
SECTION 3.04. Authority Relative to This Agreement..................................9
SECTION 3.05. No Conflict; Required Filings and Consents...........................10
SECTION 3.06. Permits; Compliance..................................................10
SECTION 3.07. SEC Filings; Financial Statements; Undisclosed Liabilities...........11
SECTION 3.08. Information Supplied.................................................12
SECTION 3.09. Absence of Certain Changes or Events.................................12
SECTION 3.10. Absence of Litigation................................................13
SECTION 3.11. Employee Benefit Plans...............................................13
SECTION 3.12. Labor and Employment Matters.........................................14
SECTION 3.13. Real Property; Title to Assets.......................................15
SECTION 3.14. Intellectual Property................................................17
SECTION 3.15. Taxes................................................................18
SECTION 3.16. Environmental Matters................................................19
SECTION 3.17. Material Contracts...................................................20
SECTION 3.18. Insurance............................................................22
SECTION 3.19. Board Approval; Vote Required........................................22
SECTION 3.20. Interested Party Transactions........................................22
SECTION 3.21. Opinion of Financial Advisor.........................................23
SECTION 3.22. Brokers..............................................................23
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................23
SECTION 4.01. Corporate Organization...............................................23
SECTION 4.02. Certificate of Formation and Limited Liability Company Agreement.....23
SECTION 4.03. Authority Relative to This Agreement.................................23
SECTION 4.04. No Conflict; Required Filings and Consents...........................23
SECTION 4.05. Information Supplied.................................................24
SECTION 4.06. Absence of Litigation................................................24
SECTION 4.07. Operations of Merger Sub.............................................25
SECTION 4.08. Financing............................................................25
SECTION 4.09. Guarantee............................................................25
SECTION 4.10. Brokers..............................................................25
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER..............................................25
SECTION 5.01. Conduct of Business by the Company Pending the Merger................25
SECTION 5.02. Conduct of Business by Parent and Merger Sub Pending the Merger......27
ARTICLE VI ADDITIONAL AGREEMENTS..............................................................28
SECTION 6.01. Proxy Statement......................................................28
SECTION 6.02. Company Stockholders' Meeting........................................28
SECTION 6.03. Access to Information; Confidentiality...............................28
SECTION 6.04. No Solicitation of Transactions......................................29
SECTION 6.05. Directors' and Officers' Indemnification and Insurance...............31
SECTION 6.06. Employee Benefits Matters............................................32
SECTION 6.07. Notification of Certain Matters......................................33
SECTION 6.08. Financing............................................................33
SECTION 6.09. Further Action; Reasonable Best Efforts..............................35
SECTION 6.10. Obligations of Parent and Merger Sub.................................36
SECTION 6.11. Public Announcements.................................................36
SECTION 6.12. Taxes................................................................36
SECTION 6.13. Resignations.........................................................36
ARTICLE VII CONDITIONS TO THE MERGER..........................................................37
SECTION 7.01. Conditions to the Obligations of Each Party..........................37
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub...............37
SECTION 7.03. Conditions to the Obligations of the Company.........................38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................................38
SECTION 8.01. Termination..........................................................38
SECTION 8.02. Effect of Termination................................................40
SECTION 8.03. Fees and Expenses....................................................40
SECTION 8.04. Amendment............................................................42
SECTION 8.05. Waiver...............................................................42
ARTICLE IX GENERAL PROVISIONS.................................................................42
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements...........42
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SECTION 9.02. Notices..............................................................42
SECTION 9.03. Certain Definitions..................................................43
SECTION 9.04. Severability.........................................................46
SECTION 9.05. Disclaimer of Other Representations and Warranties...................46
SECTION 9.06. Entire Agreement; Assignment.........................................46
SECTION 9.07. Parties in Interest..................................................47
SECTION 9.08. Remedies; Specific Performance.......................................47
SECTION 9.09. Governing Law........................................................47
SECTION 9.10. Waiver of Jury Trial.................................................47
SECTION 9.11. Headings.............................................................47
SECTION 9.12. Counterparts.........................................................48
Exhibit A Certificate of Non-Foreign Status
Exhibit B Form of Guarantee
Exhibit C Form of Title Insurance Affidavit
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AGREEMENT AND PLAN OF MERGER, dated as of August 18, 2004 (this
"AGREEMENT"), among BREP IV Hotels Holding L.L.C., a Delaware limited liability
company ("PARENT"), BREP IV Hotels Acquisition L.L.C., a Delaware limited
liability company and a wholly owned subsidiary of Parent ("MERGER SUB"), and
Prime Hospitality Corp., a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors or Board of Managers of each
of the Company, Parent and Merger Sub deem it in the best interests of their
respective stockholders or members, as the case may be, to consummate the merger
(the "MERGER"), on the terms and subject to the conditions set forth in this
Agreement, of the Company with and into Merger Sub in which Merger Sub would be
the surviving entity, and such Boards of Directors or Board of Managers, as the
case may be, have approved this Agreement and declared its advisability (and, in
the case of the Board of Directors or Board of Managers of the Company, as the
case may be (the "COMPANY BOARD"), recommended that this Agreement be adopted by
the Company's stockholders);
WHEREAS, as an inducement to Parent and Merger Sub entering into this
Agreement, Parent and certain stockholders of the Company are entering into a
voting agreement simultaneously with the execution and delivery of this
Agreement pursuant to which, among other things, such stockholders have agreed,
subject to the terms thereof, to vote their shares of the Company Common Stock
(as defined below) in favor of the adoption of this Agreement; and
WHEREAS, upon consummation of the Merger, each issued and outstanding
share of common stock, par value $.01 per share, of the Company (the "COMPANY
COMMON STOCK"), will be converted into the right to receive $12.25 per share in
cash, upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), at the Effective Time, the Company shall be
merged with and into Merger Sub. At the Effective Time, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving entity of the Merger (the "SURVIVING COMPANY").
SECTION 1.02. CLOSING. Unless this Agreement shall have been terminated in
accordance with Section 8.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing of the Merger (the "CLOSING")
will take place at 11:00 a.m., New York time, on a date to be specified by the
parties, which shall be not later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VII (other than
those that by their terms are to be satisfied or waived at the Closing), at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, Park Avenue Tower, ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another time, date and/or
place is agreed to in writing by Parent and the Company.
SECTION 1.03. EFFECTIVE TIME. Upon the terms and subject to the conditions
set forth in this Agreement, as soon as practicable after the satisfaction or
waiver of the conditions set forth in Article VII, the parties hereto shall (i)
file a certificate of merger (the "CERTIFICATE OF MERGER") in such form as is
required by, and executed and acknowledged in accordance with, the relevant
provisions of the DGCL and (ii) make all other filings or recordings required
under the DGCL to effect the Merger. The Merger shall become effective at such
date and time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such subsequent date and time as Parent and
the Company shall agree and specify in the Certificate of Merger. The date and
time at which the Merger becomes effective is referred to in this Agreement as
the "EFFECTIVE TIME".
SECTION 1.04. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in Sections 259 and 264 of the DGCL and Section
18-209 of the Delaware Limited Liability Company Act.
SECTION 1.05. LIMITED LIABILITY COMPANY AGREEMENT. Subject to Section
1.07, at the Effective Time, the Limited Liability Company Agreement of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Limited
Liability Company Agreement of the Surviving Company until thereafter amended in
accordance with the provisions thereof and as provided by Law.
SECTION 1.06. DIRECTORS AND OFFICERS. Subject to Section 1.07, the
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Company, each to hold office in accordance
with the Limited Liability Company Agreement of the Surviving Company, and the
officers of the Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Company, in each case until their respective
successors are duly elected or appointed and qualified or until the earlier of
their death, resignation or removal.
SECTION 1.07. ALTERNATIVE STRUCTURE OF MERGER. While it is currently
contemplated that the Merger shall be effected through the merger of the Company
with and into Merger Sub, Parent shall have the option, in its sole discretion
and without requiring the further consent of the Company or the Company's Board
of Directors or stockholders, upon reasonable notice to the Company, to cause
the Merger to be effected through an alternative transaction structure of Merger
Sub merging with and into the Company, with the Company being the Surviving
Company (the "ALTERNATIVE MERGER"), in which case (i) each limited liability
company interest of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Company, (ii) the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Company until thereafter amended as provided by
Law, (iii) the Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Company until thereafter
amended as provided by Law, the Certificate of Incorporation of the Surviving
Company and such Bylaws, and (iv) the directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving Company,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Company, and the officers of Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Company, in each case until their respective successors are duly elected or
appointed and qualified or until the earlier of their death, resignation or
removal. Parent shall make such election by delivering to the Company a notice
(the "ELECTION NOTICE") electing to effect the Alternative Merger. For purposes
of this Agreement, (i) all references to the term "Merger" shall be deemed to
include the Alternative Merger, except for such references contained in this
Section 1.07, and (ii) all references to the term "Surviving Company" shall be
deemed to include the Company in its capacity as the surviving entity in the
Alternative Merger. In addition, Parent shall have the option, in its sole
discretion and without requiring the further consent of the Company or the
Company's Board of Directors or stockholders, upon reasonable notice (but not
less than 15 days' notice) to the Company, to request the Company, immediately
prior to the Effective Time, to use commercially reasonable efforts to the
extent possible within such time frame to convert one or more Subsidiaries that
are organized as corporations into limited liability companies or limited
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partnerships; PROVIDED (i) that completion of any such actions or transactions
shall be contingent upon consummation of the Closing and (ii) such actions (or
the inability to complete such actions) shall not affect or modify the
obligations of Parent or Merger Sub to fulfill their obligations under this
Agreement. As part of the Proxy Statement and the Offer Documents and in the
manner required by applicable Law, the Company shall describe the provisions of
this Section 1.07.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common Stock
(all issued and outstanding shares of Company Common Stock being hereinafter
collectively referred to as the "SHARES") issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.01(b), Shares owned by any direct or indirect wholly owned subsidiary
of the Company and any Dissenting Shares) shall be canceled and shall be
converted automatically into the right to receive $12.25 in cash, without
interest (the "MERGER CONSIDERATION"), payable upon surrender in the manner
provided in Section 2.02, of the certificate that formerly evidenced such Share.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. (i) Each Share
held in the treasury of the Company and each Share owned by Merger Sub, Parent
or any direct or indirect wholly owned subsidiary of Parent immediately prior to
the Effective Time shall automatically be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto.
(c) CAPITAL STOCK OF MERGER SUB. Subject to Section 1.07, each limited
liability company interest of Merger Sub issued and outstanding immediately
prior to the Effective Time shall continue to remain outstanding and shall
constitute the only issued and outstanding limited liability company interests
of the Surviving Company.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the
Effective Time, Parent shall (i) appoint a bank or trust company reasonably
acceptable to the Company (the "PAYING AGENT"), and (ii) enter into a paying
agent agreement, in form and substance reasonably acceptable to the Company,
with such Paying Agent for the payment of the Merger Consideration in accordance
with this Article II. At the Effective Time, Parent shall deposit, or cause the
Surviving Company to deposit, with the Paying Agent, for the benefit of the
holders of Shares, cash in an amount sufficient to pay the aggregate Merger
Consideration required to be paid pursuant to Section 2.01(a) (such cash being
hereinafter referred to as the "EXCHANGE FUND"). The Exchange Fund shall not be
used for any other purpose. The Exchange Fund shall be invested by the Paying
Agent as directed by Parent; PROVIDED, HOWEVER, that such investments shall be
in obligations of or guaranteed by the United States of America or any agency or
instrumentality thereof and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1 billion (based on the
most recent financial statements of such bank which are then publicly
available). Any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Company.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, Parent shall cause the Paying Agent to mail to each person who was, at the
Effective Time, a holder of record of Shares entitled to receive the Merger
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Consideration pursuant to Section 2.01(a): (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the certificates evidencing such Shares (the
"CERTIFICATES") shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender to the
Paying Agent of a Certificate for cancellation, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the amount of cash which such holder has the right to
receive in respect of the Shares formerly represented by such Certificate
pursuant to Section 2.01(a), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, payment of the Merger
Consideration may be made to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate representing such
Shares shall be properly endorsed or otherwise be in proper form for transfer
and the person requesting such payment shall pay any transfer or other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration to which the holder of such
Certificate is entitled pursuant to this Article II. No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) NO FURTHER RIGHTS. From and after the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of the Company,
except as provided herein or by Law.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of Shares for one year after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
Parent for, and Parent shall remain liable for, payment of their claim for the
Merger Consideration. Any portion of the Exchange Fund remaining unclaimed by
holders of Shares as of a date which is immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Authority shall, to the extent permitted by applicable Law, become the property
of Parent free and clear of any claims or interest of any person previously
entitled thereto.
(e) NO LIABILITY. None of the Paying Agent, Merger Sub, Parent or the
Surviving Company shall be liable to any holder of Shares for any such Shares
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar Law.
(f) WITHHOLDING RIGHTS. Each of the Paying Agent, the Surviving Company
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to such payment
under all applicable Tax Laws. To the extent that amounts are so withheld by the
Paying Agent, the Surviving Company or Parent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made by the Paying Agent, the Surviving Company or Parent, as the case may
be.
(g) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Company, the posting by such person of a bond, in such reasonable
amount as the Surviving Company may direct, as indemnity against any claim that
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may be made against it with respect to such Certificate, the Paying Agent shall
pay in respect of such lost, stolen or destroyed Certificate the Merger
Consideration to which the holder thereof is entitled pursuant to Section
2.01(a).
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates representing
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares, except as otherwise provided in this
Agreement or by Law. On or after the Effective Time, any Certificates presented
to the Paying Agent or Parent for any reason shall be canceled against delivery
of the Merger Consideration to which the holders thereof are entitled pursuant
to Section 2.01(a).
SECTION 2.04. COMPANY STOCK OPTIONS. (a) Between the date of this
Agreement and the Effective Time, the Company shall take all necessary action
(which action shall be effective as of the Effective Time), including obtaining
the consent of the individual option holders and the adoption of Company Board
resolutions, if necessary, to (i) terminate the 1995 Employee Stock Option Plan,
the 1995 Non-Employee Director Stock Option Plan, the Nonqualified Stock Option
Agreement dated October 14, 1998 between ▇.▇. ▇▇▇▇▇▇▇▇▇▇ and the Company, and
the Nonqualified Stock Option Agreement dated October 23, 2001 between ▇.▇.
▇▇▇▇▇▇▇▇▇▇ and the Company, in each case as amended through the date of this
Agreement (collectively, the "COMPANY STOCK OPTION PLANS"), and (ii) cancel, as
of the Effective Time, each option to purchase Shares granted under the Company
Stock Option Plans (each, a "COMPANY STOCK OPTION") that is outstanding and
unexercised, as of the Effective Time (in each case, without the creation of
additional liability to the Company or any Subsidiaries).
(b) Each holder of a Company Stock Option that is outstanding and
unexercised as of the Effective Time and has an exercise price per Share that is
less than the per share Merger Consideration shall (subject to the provisions of
this Section 2.04) be paid by the Surviving Company, in exchange for the
cancellation of such Company Stock Option, an amount in cash (subject to any
applicable withholding Taxes) equal to the product of (i) the difference between
the per share Merger Consideration and the applicable exercise price of such
Company Stock Option, and (ii) the aggregate number of Shares issuable upon
exercise of such Company Stock Option (the "OPTION PAYMENT"). The Surviving
Company shall make the Option Payments as promptly as practicable after the
Effective Time. Any such payments shall be subject to all applicable federal,
state and local Tax withholding requirements.
SECTION 2.05. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary and to the extent available under the DGCL, Shares
that are outstanding immediately prior to the Effective Time and that are held
by any stockholder who is entitled to demand and properly demands the appraisal
for such Shares (the "DISSENTING SHARES") pursuant to, and who complies in all
respects with, the provisions of Section 262 of the DGCL ("SECTION 262") shall
not be converted into, or represent the right to receive, the Merger
Consideration. Any such stockholder shall instead be entitled to receive payment
of the fair value of such stockholder's Dissenting Shares in accordance with the
provisions of Section 262; PROVIDED, HOWEVER, that all Dissenting Shares held by
any stockholder who shall have failed to perfect or who otherwise shall have
withdrawn or lost such stockholder's rights to appraisal of such Shares under
Section 262 shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon, upon surrender in the manner
provided in Section 2.02 of the Certificate or Certificates that formerly
evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands
received by the Company for appraisal of any Shares, withdrawals of such demands
and any other instruments served pursuant to the DGCL and received by the
Company and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
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Company shall not, except with the prior written consent of Parent, make any
payment or agree to make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
SECTION 2.06. DEBT OFFER. (a) The Company shall use its reasonable best
efforts to commence, on the date 14 days prior to the estimated date of mailing
the Proxy Statement or on any other date designated by Parent on at least five
days notice to the Company, an offer to purchase, and related consent
solicitation with respect to, all of the outstanding aggregate principal amount
of the Company's 8 3/8 % Senior Subordinated Notes due 2012 (the "NOTES") on the
terms and conditions set forth in Section 2.06(a) of the Company Disclosure
Schedule (or as may be agreed between the Company and Parent) and such other
customary terms and conditions as are reasonably acceptable to Parent and the
Company (including the related consent solicitation, the "DEBT OFFER"); provided
that (A) this Agreement shall not have been terminated in accordance with
Section 8.01, (B) the Company shall have received from Parent the completed
Offer Documents (as defined below), which shall be in form and substance
reasonably satisfactory to the Company, and (C) at the time of such
commencement, Parent shall have otherwise performed or complied with all of its
agreements and covenants required by this Agreement to be performed on or prior
to the time that the Debt Offer is to be commenced. The Company shall waive any
of the conditions to the Debt Offer (other than that the Merger shall have been
consummated and that there shall be no order or injunction prohibiting
consummation of the Debt Offer) as may be reasonably requested by Parent and
shall not, without the consent of Parent, waive any condition to the Debt Offer
or make any changes to the terms and conditions of the Debt Offer other than as
agreed between Parent and the Company. Notwithstanding the immediately preceding
sentence, the Company need not make any change to the terms and conditions of
the Debt Offer requested by Parent that decreases the price per Note payable in
the Debt Offer or related consent solicitation or imposes conditions to the Debt
Offer or related consent solicitation in addition to those set forth in Section
2.06(a) of the Company Disclosure Schedule that are materially adverse to
holders of the Notes, unless such change is approved by the Company in writing.
(b) The Company covenants and agrees that, immediately following the
consent expiration date, assuming the requisite consents are received, it shall
execute a supplemental indenture to the indenture governing the Notes, which
supplemental indenture shall implement the amendments set forth in the Offer
Documents and shall become operative immediately prior to the Effective Time,
subject to the terms and conditions of this Agreement (including the conditions
to the Debt Offer). Concurrent with the Effective Time, Parent shall cause the
Surviving Company to accept for payment and thereafter promptly pay for the
Notes that have been properly tendered and not withdrawn pursuant to the Debt
Offer and in accordance with the Debt Offer.
(c) Promptly after the date of this Agreement, Parent shall prepare all
necessary and appropriate documentation in connection with the Debt Offer,
including the offer to purchase, related letter of transmittal and other related
documents (collectively, the "OFFER DOCUMENTS"). Parent and the Company shall
cooperate with each other in the preparation of the Offer Documents. All
mailings to the holders of the Notes in connection with the Debt Offer shall be
subject to the prior review and comment by of the Company and Parent and shall
be reasonably acceptable to each of them. If at any time prior to the completion
of the Debt Offer any information in the Offer Documents should be discovered by
the Company or Parent which should be set forth in an amendment or supplement to
the Offer Documents, so that the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, the party that
discovers such information shall promptly notify the other party, and an
appropriate amendment or supplement describing such information shall be
disseminated to the holders of the Notes. Notwithstanding anything to the
contrary in this Section 2.06, the Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other applicable Law to the extent
such Laws are applicable in connection with the Debt Offer. To the extent that
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the provisions of any applicable Law conflict with this Section 2.06, the
Company shall comply with the applicable Law and shall not be deemed to have
breached its obligations hereunder by such compliance.
(d) Parent shall pay the reasonable fees and expenses of any dealer
manager, information agent, depositary or other agent retained in connection
with the Debt Offer, and Parent further agrees to reimburse the Company for all
of its reasonable out-of-pocket costs in connection with the Debt Offer promptly
following incurrence and delivery of reasonable documentation of such costs.
Parent and Merger Sub shall, on a joint and several basis, indemnify and hold
harmless the Company, the Subsidiaries, their respective officers and directors
and each person, if any, who controls the Company within the meaning of Section
20 of the Exchange Act for and against any and all liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments and penalties suffered or
incurred by them in connection with the Debt Offer and the Offer Documents;
PROVIDED, HOWEVER, that neither Parent nor Merger Sub shall have any obligation
to indemnify and hold harmless any such party or person to the extent that any
such liabilities, losses, damages, claims, costs, expenses, interest, awards,
judgments and penalties suffered or incurred arises from disclosure regarding
the Company that is determined to have contained a material misstatement or
omission.
SECTION 2.07. NON-FOREIGN STATUS. At or prior to the Effective Time, the
Company shall furnish to Parent and Merger Sub a duly executed certification of
the Company's non-foreign status in the form set forth in EXHIBIT A to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Parent and Merger Sub concurrently with the execution and delivery of this
Agreement (the "COMPANY DISCLOSURE SCHEDULE") (PROVIDED that disclosure of any
fact or item in any section of the Company Disclosure Schedule shall, should the
existence of such fact or item be relevant to any other section, be deemed to be
disclosed with respect to that other section so long as the relevance of such
disclosure to such other section is reasonably apparent), the Company hereby
represents and warrants to Parent and Merger Sub as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
the Company and each subsidiary of the Company (each, a "SUBSIDIARY") is a
corporation, limited partnership or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate, limited liability company or
limited partnership power and authority, as the case may be, and all necessary
governmental approvals to own, lease, franchise, manage and operate its
properties and to carry on its business as it is now being conducted. Each of
the Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased, franchised, managed or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not reasonably be expected to have a Company Material
Adverse Effect. The term "COMPANY MATERIAL ADVERSE EFFECT" means any event,
circumstance, development, change or effect that, individually or in the
aggregate with all other events, circumstances, developments, changes and
effects, is materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company and the
Subsidiaries taken as a whole or would reasonably be expected to prevent or
materially delay the consummation of any of the Transactions or prevent or
materially impair or delay the ability of the Company to perform its obligations
hereunder; PROVIDED, HOWEVER, that in no event shall any of the following, alone
7
or in combination, be deemed to constitute, nor shall any of the following be
taken into account in determining whether there has been, or will be, a "COMPANY
MATERIAL ADVERSE EFFECT": any event, circumstance, change or effect resulting
from or relating to (i) a change in general economic or financial market
conditions, (ii) a change in industry conditions, (iii) seasonal fluctuations in
the business of the Company and the Subsidiaries, (iv) any acts of terrorism or
war (except to the extent such event, circumstance, change or effect has had a
disproportionate effect on the Company and the Subsidiaries as compared to other
persons in the industry in which the Company and the Subsidiaries conducts their
business), (v) the announcement of the execution of this Agreement or the
pendency or consummation of the Transactions, or (vi) compliance with the terms
of, or the taking of any action required by, this Agreement; and PROVIDED,
FURTHER, that with respect to the representations and warranties set forth in
Section 3.05, the exceptions set forth in clauses (v) and (vi) will not apply.
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of organization of each Subsidiary and the percentage of the
outstanding capital stock of each Subsidiary owned by the Company, each other
Subsidiary and any other person, is set forth in Section 3.01(b) of the Company
Disclosure Schedule.
(c) Section 3.01(c) of the Company Disclosure Schedule lists any and all
persons of which the Company directly or indirectly owns an equity or similar
interest, or an interest convertible into or exchangeable or exercisable for an
equity or similar interest, of less than 50% (collectively, the "INVESTMENTS").
The Company or a Subsidiary, as the case may be, owns all Investments free and
clear of all Liens, and there are no outstanding contractual obligations of the
Company or any Subsidiary permitting the repurchase, redemption or other
acquisition of any of its interest in the Investments or to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, or provide any guarantee with respect to, any Investment.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
made available to Parent a complete and correct copy of the Certificate of
Incorporation and the Bylaws or similar organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation and Bylaws are in full force and effect and no other
organizational documents are applicable or binding upon the Company or any of
its Subsidiaries. Neither the Company nor any Subsidiary is, nor has the Company
been, in violation of any of the provisions of its Certificate of Incorporation
or Bylaws. No Subsidiary has been in material violation of any of the provisions
of its Certificate of Incorporation or Bylaws. The Company has made available to
Parent complete and correct copies of the minutes of all meetings of the Company
Board (and each committee thereof) and of the stockholders of the Company, in
each case since January 1, 2001.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of (i) 75,000,000 shares of Company Common Stock and (ii)
20,000,000 shares of preferred stock, par value $.10 per share ("COMPANY
PREFERRED STOCK"). As of August 17, 2004, (i) 44,614,372 shares of Company
Common Stock are issued and outstanding (excluding shares of Common Stock held
in the treasury of the Company), all of which are validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights, (ii)
12,244,778 shares of Company Common Stock are held in the treasury of the
Company, (iii) no shares of Company Common Stock are held by the Subsidiaries,
(iv) 6,054,354 shares of Company Common Stock are issuable upon exercise of
outstanding Company Stock Options granted under the Company Stock Option Plans
at a weighted average per share exercise price of $8.27 and (v) 2,905,696 shares
of Company Common Stock are reserved for future issuance in connection with the
Company Stock Option Plans (including shares reserved pursuant to outstanding
Company Stock Options). Since August 17, 2004 through the date of this
Agreement, other than in connection with the issuance of Shares pursuant to the
exercise of Company Stock Options outstanding as of August 17, 2004 there has
been no change in the number of shares of outstanding capital stock of the
Company or the number of outstanding Company Stock Options. As of the date of
8
this Agreement, no shares of Company Preferred Stock are issued and outstanding.
The Company does not have a "poison pill" or similar stockholder rights plan.
Except as set forth in this Section 3.03, there are no (A) options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any Subsidiary or
obligating the Company or any Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any Subsidiary (B) voting
securities of the Company or securities convertible, exchangeable or exercisable
for shares of capital stock or voting securities of the Company, or (C) equity
equivalents, interests in the ownership or earnings of the Company or similar
rights. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. There are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other person. None of the Company or any Subsidiary is a party
to any stockholders' agreement, voting trust agreement or registration rights
agreement relating to any equity securities of the Company or any Subsidiary or
any other Contract relating to disposition, voting or dividends with respect to
any equity securities of the Company or of any Subsidiary. All dividends on the
Company Common Stock that have been declared or have accrued prior to the date
of this Agreement have been paid in full to the Company's paying agent.
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and was issued free of
preemptive (or similar) rights, and each such share is owned by the Company or
another Subsidiary free and clear of all options, rights of first refusal,
agreements, limitations on the Company's or any Subsidiary's voting, dividend or
transfer rights, charges and other encumbrances or Liens of any nature
whatsoever.
(c) As of the date of this Agreement, the only outstanding indebtedness
for borrowed money of the Company and the Subsidiaries is (i) $178,725,000 in
aggregate principal amount of Notes issued by the Company, (ii) $20,000,000 in
aggregate principal amount of loans of the Company under the Credit Agreement,
dated as of July 22, 2002, among the Company and the Canadian Imperial Bank of
Commerce as administrative agent (the "CREDIT AGREEMENT"), (iii) $915,000 in
aggregate principal amount pursuant to the 6.7% Mortgage Note due January 1,
2005 issued by the Company and secured by the Prime Hotel & Suites, Fairfield,
New Jersey (the "FAIRFIELD MORTGAGE") and (iv) $12,965,899 in aggregate
principal amount pursuant to the 8.63% Mortgage Note due October 1, 2009 issued
by Haledon Holding Corp. and secured by the Prime Suites, Secaucus, New Jersey
(the mortgages referred to in clauses (iii) and (iv), collectively, the
"MORTGAGES"). In addition, the only outstanding indebtedness for borrowed money
of East ▇▇▇▇▇▇▇▇▇▇ Group, L.L.C. or 3072929 Nova Scotia Company is (i)
$24,264,481 in aggregate principal amount pursuant to the LIBOR+2.75% Mortgage
Note due May 1, 2006 issued by East ▇▇▇▇▇▇▇▇▇▇ Group, L.L.C. and secured by the
Sheraton Meadowlands Hotel and Conference Center, Meadowlands, New Jersey, up to
$4,000,000 of which is guaranteed by the Company, and (ii) CN $7,788,705 in
aggregate principal amount pursuant to the 6.26% Mortgage Note due August 1,
2008 issued by 3072929 Nova Scotia Company and secured by the Holiday Inn
Select, Quebec City.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
9
adoption of this Agreement by the holders of a majority of the then-outstanding
shares of Company Common Stock and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to the effect of general principles of equity.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company and the consummation by the Company
of the Transactions will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws (or similar organizational documents) of the Company or
any Subsidiary, (ii) assuming that all consents, approvals and other
authorizations described in Section 3.05(b) have been obtained and that all
filings and other actions described in Section 3.05(b) have been made or taken,
conflict with or violate any statute, law, ordinance, regulation, rule, code,
executive order, judgment, decree or other order ("LAW") applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in any breach or violation
of or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, require consent or result in a material
loss of a material benefit under, give rise to a right or obligation to purchase
or sell assets or securities under, give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any property or asset of the Company or any Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract (written or oral), agreement, lease,
license, permit, franchise or other binding commitment, instrument or obligation
(each, a "CONTRACT") to which the Company or any Subsidiary is a party or by
which the Company or a Subsidiary or any property or asset of the Company or any
Subsidiary is bound or affected, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not reasonably be expected to have a Company Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company and the consummation by the
Company of the Transactions will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
supranational, national, provincial, federal, state or local government,
regulatory or administrative authority, or any court, tribunal, or judicial or
arbitral body (a "GOVERNMENTAL AUTHORITY"), except for (i) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (ii) the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement relating to the adoption of this Agreement by
the Company's stockholders (as amended or supplemented from time to time, the
"PROXY STATEMENT"), (iii) any filings required under the rules and regulations
of the New York Stock Exchange (the "NYSE"), (iv) the filing and recordation of
appropriate merger documents as required by the DGCL and appropriate documents
with the relevant authorities of other states in which the Company or any
Subsidiary is qualified to do business, (v) any state or federal Laws governing
the sale of liquor that may be applicable, and (vi) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and each Subsidiary
is in possession of all franchises, grants, authorizations, licenses, including
liquor licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
each such entity to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "COMPANY PERMITS"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not reasonably be expected to have a Company Material Adverse
Effect. No suspension or cancellation of any of the Company Permits is pending
or, to the knowledge of the Company, threatened, except where the failure to
have, or the suspension or cancellation of, any of the Company Permits would not
reasonably be expected to have a Company Material Adverse Effect. Each of the
10
Company and each Subsidiary is in compliance with, and since January 1, 2001 has
been or has taken any necessary steps to become in compliance with, (a) any Law
applicable to such entity or by which any property or asset of such entity is
bound or affected, and (b) any Contract or Company Permit to which such entity
is a party or by which such entity or any property or asset of such entity is
bound, except, with respect to clauses (a) and (b), for any such conflicts,
defaults, breaches or violations that would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has filed all forms, reports, statements, schedules and other
documents required to be filed by it with the SEC since January 1, 2001
(collectively, the "SEC REPORTS"). The SEC Reports (i) were prepared in
accordance with the applicable requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Exchange Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
and, in each case, the rules and regulations promulgated thereunder, and (ii)
did not, at the time they were filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading (including any financial statements or other documentation
incorporated by reference therein). No Subsidiary is required to file any form,
report or other document with the SEC. The Company has made available to Parent
copies of all correspondence between the SEC, on the one hand, and the Company
and any of the Subsidiaries, on the other hand, since January 1, 2001 through
the date of this Agreement.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports, when filed, complied with
applicable accounting requirements and with published rules and regulations of
the SEC with respect thereto, was prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments). All of the
Subsidiaries are consolidated for accounting purposes.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as at June 30, 2004
(including the notes thereto) included in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2004, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred (i) in connection with the Transactions, or (ii) in the ordinary course
of business and in a manner consistent with past practice since June 30, 2004
that would not reasonably be expected to have a Company Material Adverse Effect.
(d) Except as and to the extent set forth on the balance sheet of East
▇▇▇▇▇▇▇▇▇▇ Group, L.L.C. as at July 31, 2004 and the balance sheet of 3072929
Nova Scotia Company as at July 31, 2004 set forth in Section 3.07(d) of the
Company Disclosure Schedule, to the Company's knowledge, neither East ▇▇▇▇▇▇▇▇▇▇
Group, L.L.C. nor 3072929 Nova Scotia Company has any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except, with
respect to each entity, for liabilities and obligations incurred in the ordinary
course of business and in a manner consistent with past practice since July 31,
2004 that would not, individually or in the aggregate, reasonably be expected to
11
be material to such entity or to interfere in any material respect with the
conduct of such entity's business as conducted on the date of this Agreement.
(e) The Company has made available to Parent a complete and correct copy
of any amendments or modifications which have not yet been filed with the SEC to
Contracts which previously have been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
(f) The Company and its Subsidiaries have prepared and maintained each of
its Uniform Franchise Offering Circulars ("UFOCS") in accordance with applicable
Law, have filed its UFOCs in all states in which the Company and its
Subsidiaries offered or sold franchises which required registration and approval
prior to offers or sales of franchises in such states and have not failed to
file any required amendments or renewals on a timely and accurate basis, except
where the failure to do any of the foregoing would not reasonably be expected to
have a Company Material Adverse Effect. The Company has provided Parent copies
of all material correspondence it or any of the Subsidiaries have received or
sent since January 1, 2001 affecting the registration and renewals of the UFOCs
in the applicable states. The Company and its Subsidiaries do not and have not
authorized their officers, directors or representatives to furnish any materials
or information which is inconsistent in any material respect with the "earnings
claim" information set forth in Item 19 of the UFOCs, as that term is defined by
federal and state franchising laws.
SECTION 3.08. INFORMATION SUPPLIED. None of the information included or
incorporated by reference in the Proxy Statement or the Offer Documents will, in
the case of the Proxy Statement, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting or at the time
of any amendment or supplement thereof, or, in the case of the Offer Documents,
at the time the Offer Documents are first published, sent, or given to holders
of the Notes, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in connection with the preparation
of the Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 2004,
there has not been any event, circumstance, change, development or effect that,
individually or in the aggregate, has had or would reasonably be expected to
have, a Company Material Adverse Effect. Since June 30, 2004 and prior to the
date hereof, except as expressly contemplated by this Agreement, (a) the Company
and the Subsidiaries have conducted their businesses only in the ordinary course
of business and in a manner consistent with past practice, and (b) neither the
Company nor any Subsidiary has:
(i) amended or otherwise changed its Certificate of Incorporation or
Bylaws;
(ii) declared, set aside, made or paid any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except for dividends by any direct or indirect wholly owned
Subsidiary to the Company or any other Subsidiary;
(iii) reclassified, combined, split, subdivided or redeemed, or purchased
or otherwise acquired, directly or indirectly, any of its capital stock;
(iv) increased the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and in a manner consistent with past
12
practice, or granted any severance or termination pay to, or entered into any
employment, bonus, change of control or severance agreement with, any director
or officer or, except in the ordinary course of business in a manner consistent
with past practice, any other employee of the Company or of any Subsidiary;
(v) suffered any damage, destruction or loss (whether or not covered by
insurance), other than in the ordinary course of business, that has had a
Company Material Adverse Effect;
(vi) made any change in financial or Tax accounting methods or practices
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in GAAP;
(vii) made any acquisition or disposition of any real property;
(viii) made any material tax election or settled or compromised any
material United States federal, state or local income tax liability; or
(ix) announced an intention, entered into any formal or informal agreement
or otherwise made a commitment, to do any of the foregoing.
SECTION 3.10. ABSENCE OF LITIGATION. There is no litigation, suit, claim,
action, proceeding, hearing, petition, grievance, complaint or investigation (an
"ACTION") pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary, or any property or asset of the Company or any
Subsidiary, before any Governmental Authority or arbitrator that would
reasonably be expected to have a Company Material Adverse Effect. As of the date
of this Agreement, no officer or director of the Company is a defendant in any
Action in connection with his status as an officer or director of the Company or
any Subsidiary. Other than pursuant to Certificates of Incorporation, Bylaws or
other organizational documents, no Contract between the Company or any
Subsidiary and any current or former director or officer exists that provides
for indemnification. Neither the Company nor any Subsidiary nor any property or
asset of the Company or any Subsidiary is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of the Company, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS. (a) Section 3.11(a) of the Company
Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
and all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
employment, termination, severance or other contracts or agreements to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, consultant, officer or director of the Company or any
Subsidiary (collectively, the "PLANS"). The Company has made available to Parent
a true and complete copy of each Plan and has made available to Parent a true
and complete copy of (where applicable) (A) each trust or funding arrangement
prepared in connection with each such Plan, (B) the two most recently filed
annual reports on Internal Revenue Service ("IRS") Form 5500, (C) the most
recently received IRS determination letter for each such Plan, (D) the two most
recently prepared actuarial reports and financial statements in connection with
each such Plan, and (E) the most recent summary plan description and any
material written communications (or a description of any material oral
communications) by the Company or the Subsidiaries to any current or former
13
employees, consultants, or directors of the Company or any Subsidiary concerning
the extent of the benefits provided under a Plan.
(b) Neither the Company nor any Subsidiary has now or any time contributed
to, sponsored, or maintained (i) a pension plan (within the meaning of Section
3(2) of ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "MULTIEMPLOYER PLAN"); or (iii) a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary
could incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER
PLAN"). No Plan exists that could result in the payment to any present or former
employee, director or consultant of the Company or any Subsidiary of any money
or other property or accelerate or provide any other rights or benefits to any
current or former employee of the Company or any Subsidiary as a result of the
consummation of the Transactions (whether alone or in connection with any
subsequent event). There are no contracts, plans or arrangements (written or
otherwise) covering any current or former employee of the Company or any
Subsidiary that, individually or collectively, could give rise to payments in
excess of the amounts set forth in Section 3.11(b) of the Company Disclosure
Schedule that would not be deductible pursuant to the terms of Section 280G of
the United States Internal Revenue Code of 1986, as amended (the "CODE").
(c) With respect to the Plans, no event has occurred and, to the knowledge
of the Company, there exists no condition or set of circumstances, in connection
with which the Company or any Subsidiary could reasonably be expected to be
subject to any actual or contingent liability under the terms of such Plan or
any applicable Law which would reasonably be expected to have a Company Material
Adverse Effect.
(d) Each Plan that is intended to be qualified under Section 401(a) of the
Code or Section 401(k) of the Code has received a favorable determination letter
from the IRS covering all of the provisions applicable to the Plan for which
determination letters are currently available that the Plan is so qualified and
each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and, to the
knowledge of the Company, no circumstance exists that could reasonably be
expected to result in the revocation of such letter.
(e) (i) Each Plan has been established and administered in accordance with
its terms, and in compliance with the applicable provisions of ERISA, the Code
and other applicable Laws, except to the extent such noncompliance, individually
or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect, and (ii) no Plan provides retiree welfare benefits, and neither
the Company nor any Subsidiary has any obligation to provide any retiree welfare
benefits other than as required by Section 4980B of the Code.
(f) With respect to any Plan, (i) no Actions (other than routine claims
for benefits in the ordinary course) are pending or, to the knowledge of the
Company, threatened, that would reasonably be expected to have a Company
Material Adverse Effect, (ii) to the knowledge of the Company, no facts or
circumstances exist that could reasonably be expected to give rise to any such
Actions, and (iii) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the IRS or other
Governmental Authority is pending, in progress or, to the knowledge of the
Company, threatened that could reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.12. LABOR AND EMPLOYMENT MATTERS(a) . Section 3.12 of the
Company Disclosure Schedule lists each collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or any
Subsidiary to which the Company or any Subsidiary is a party. Except as set
forth in Section 3.12 of the Company Disclosure Schedule, to the knowledge of
the Company there are no activities or proceedings of any labor union to
14
organize any employees of the Company or any Subsidiary. As of the date hereof,
there are no unfair labor practice complaints pending against the Company or any
Subsidiary before the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving employees of
the Company or any Subsidiary. As of the date hereof, there is no strike,
controversy, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threatened in writing, by or with respect to any employees of the
Company or any Subsidiary.
SECTION 3.13. REAL PROPERTY; TITLE TO ASSETS. (a) Section 3.13(a)(i) of
the Company Disclosure Schedule lists each parcel of real property currently
owned by the Company or any Subsidiary and sets forth the Company or the
applicable Subsidiary owning such properties (collectively, the "OWNED REAL
PROPERTIES"). Section 3.13(a)(ii) of the Company Disclosure Schedule lists each
parcel of real property currently ground leased by the Company or any Subsidiary
(collectively, the "GROUND LEASED PROPERTIES"; the Ground Leased Properties
together with the Owned Properties, collectively, the "PROPERTIES") and sets
forth the Company or the Subsidiary holding such leasehold interest, with the
name of the lessor and the date of the lease, any subleases and assignments, any
guarantees given and each amendment to any of the foregoing (collectively, the
"GROUND LEASES"). The Company or the applicable Subsidiary set forth on Section
3.13(a)(i) of the Company Disclosure Schedule owns fee simple title to the Owned
Real Properties and the Company or the applicable Subsidiary set forth on
Section 3.13(a)(ii) of the Company Disclosure Schedule owns leasehold title to
the Ground Leased Properties, in each case, free and clear of all mortgages,
pledges, liens, restrictions security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of any
kind, including any easement, right of way or other encumbrance to title, or any
option, right of first refusal, or right of first offer (collectively, "LIENS"),
other than (i) Liens for current taxes and assessments not yet due and payable,
(ii) inchoate mechanics' and materialmen's Liens for construction in progress,
(iii) the Mortgages (iv) all matters of record and other Liens which are
disclosed in the Title Policies (as defined below) that the Company has made
available to Parent, and (v) to the extent such Liens would not reasonably be
expected to have a Company Material Adverse Effect, (A) workmen's, repairmen's,
warehousemen's and carriers' Liens arising in the ordinary course of business of
the Company or such Subsidiary consistent with past practice, (B) all matters of
record, and (C) all Liens and other imperfections of title and encumbrances that
are typical for the applicable property type and locality and which would not
reasonably be expected to materially interfere with the conduct of the business
of the Company (collectively, "PERMITTED LIENS"). None of the Properties is
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor, to the knowledge of the Company, has any such
condemnation, expropriation or taking been proposed. Neither the Company nor any
Subsidiary has violated any material covenants, conditions or restrictions
affecting any Properties which violations would reasonably be expected to have a
Company Material Adverse Effect.
(b) Section 3.13(b) of the Company Disclosure Schedule lists each real
property lease or sublease (other than the Ground Leases) the Company or any
Subsidiary is currently a party, or subject, to, as either a tenant, landlord,
lessee, lessor, sublandlord or subtenant and sets forth the Company or the
Subsidiary holding such interest, with the name of the other party or parties
thereto and the date of the lease, any sublease or assignment, any guaranty
given or leasing commissions remaining payable by the Company or any Subsidiary
in connection therewith and each amendment to any of the foregoing
(collectively, the "SPACE LEASES").
(c) Each of the Ground Leases and the Space Leases is valid, binding and
in full force and effect as against the Company or the Subsidiaries and, to the
Company's knowledge, as against the other party thereto. Neither the Company nor
the Subsidiaries has received written notice under any of the Ground Leases or
the Space Leases of any default, and, to the Company's knowledge, no event has
15
occurred which, with notice or lapse of time or both, would constitute a
material default by the Company or the applicable Subsidiaries.
(d) To the knowledge of the Company, there are no latent defects or
adverse physical conditions affecting any Property or the improvements thereon,
other than those that would not reasonably be expected to have a Company
Material Adverse Effect.
(e) The Company and the Subsidiaries have not received any written notice
and are not otherwise aware that valid policies of title insurance or title
commitments for which premiums have been paid (collectively, the "TITLE
POLICIES") insuring the Company or the applicable Subsidiary's fee simple or
leasehold title to the Properties owned or ground leased by the Company or the
applicable Subsidiary are not in full force and effect. To the Company's
knowledge, no claim has been made by the Company or the Subsidiaries against any
Title Policies within the last 10 years.
(f) There are no Properties under construction as of the date hereof.
(g) Except as set forth on Schedule 3.13(g) of the Company Disclosure
Schedule, neither the Company nor any of the Subsidiaries is a party to any
third party management, franchise, license or other agreement for the management
of operations conducted at any Property (the "THIRD PARTY FLAG AGREEMENTS").
(h) Section 3.13(h) of the Company Disclosure Schedule lists each parcel
of real property in respect of which any person (other than the Company or any
Subsidiary) has the right, pursuant to a franchise, license, satellite
agreement, franchise development agreement, area development agreement,
development incentive agreement or other Contract (together with any amendments,
guarantees and any ancillary documents and agreements related thereto, the
"FRANCHISE AGREEMENTS") to utilize a brand name or other rights of a hotel chain
or system from the Company or any Subsidiary. Such schedule also identifies the
applicable brand of such property and the Franchise Agreement related thereto.
Each Franchise Agreement is valid, binding and in full force and effect as
against the Company or the Subsidiaries and, to the Company's knowledge, as
against the other party thereto. Neither the Company nor any Subsidiary has
received or delivered written notice under any of the Franchise Agreements of
any default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material default by the
Company or the applicable Subsidiary or the other party thereto.
(i) Section 3.13(i) of the Company Disclosure Schedule lists each parcel
of real property that is managed by the Company or a Subsidiary pursuant to a
management agreement or other Contract (together with any amendments, guarantees
and any ancillary documents and agreements related thereto, the "MANAGEMENT
AGREEMENTS"). Such schedule also identifies the applicable brand of such
property and the Management Agreement related thereto. Each Management Agreement
is valid, binding and in full force and effect as against the Company or the
Subsidiaries and, in the case of the HPT Documents (as defined below) and those
certain management agreements between the applicable Subsidiary and affiliates
of Equity Inns, Inc. (together with any amendments, guarantees and any ancillary
documents and agreements related thereto, the "EQUITY INN DOCUMENTS"), as
against the other party thereto. Neither the Company nor any Subsidiary has
received or delivered written notice under any of the Management Agreements of
any default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material default by the
Company or the applicable Subsidiary or, in the case of the HPT Documents and
the Equity Inn Documents, the other party thereto. As of the date hereof, (i)
the Company has utilized $3,364,911 of the $25,000,000 that is to be provided by
HPT TRS SPES II, Inc. or an affiliate thereof ("HPT") pursuant to the terms of
that certain Management Agreement between the applicable Subsidiary and HPT (the
"HPT MANAGEMENT AGREEMENT", together with any amendments, guarantees and any
16
ancillary documents and agreements related thereto, the "HPT DOCUMENTS"), (ii)
in accordance with Section 5.3 of the HPT Management Agreement, the applicable
Subsidiary has delivered the requisite budgets and schedules to HPT, which
budgets and schedules cover the balance of the $25,000,000 to be provided by HPT
less the amounts previously utilized by the Company as disclosed above (the "HPT
RESERVE BALANCE"), (iii) the HPT Reserve Balance has not been utilized or
expended by the applicable Subsidiary and remains available for use by such
Subsidiary in accordance with the HPT Management Agreement, (iv) to the
Company's knowledge, the HPT Reserve Balance has been deposited by HPT in the
Reserve Account (as defined in the HPT Management Agreement) and remains an
obligation of HPT to be funded in accordance with the HPT Management Agreement
and (vi) to the Company's knowledge, no amounts are due or payable by the
Company or the applicable Subsidiary in connection with any Retained Liabilities
(as defined in the HPT Documents).
(j) Section 3.13(j) of the Company Disclosure Schedule lists each parcel
of real property or leasehold interest in any ground lease conveyed,
transferred, assigned or otherwise disposed of by the Company or any Subsidiary
since January 1, 1991.
(k) The Company or the Subsidiaries own all material furniture, fixtures,
equipment, operating supplies and other personal property (the "PERSONAL
PROPERTY") necessary for the operation of each Property, subject to no Liens,
except as would not reasonably be expected to have a Company Material Adverse
Effect.
(l) Section 3.13(l) of the Company Disclosure Schedule lists each loan
document (together with any amendments, guarantees and any ancillary documents
and agreements related thereto, the "LOAN DOCUMENTS") with respect to any loans
made by the Company or any Subsidiary to any person (other than the Company or
any Subsidiary) which as of the date of this Agreement has an outstanding
balance that is payable by such party to the Company or any Subsidiary or
pursuant to which Indebtedness to the Company or any Subsidiary may be incurred
by such party (collectively, the "LOANS"). As of the date of this Agreement, the
outstanding principal amount of each Loan or the amount of Indebtedness that may
be borrowed under each Loan Document is not less than the amount set forth on
Section 3.13(l) of the Company Disclosure Schedule. Neither the Company nor any
Subsidiary (i) has delivered any written notice of default under the Loan
Documents or (ii) executed any written waiver of any rights of the Company or
the Subsidiaries under the Loan Documents.
SECTION 3.14. INTELLECTUAL PROPERTY. (a) Except as would not reasonably be
expected to have a Company Material Adverse Effect, (i) the conduct of the
business of the Company and the Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any third
party, and no claim has been asserted to the Company or any Subsidiary that the
conduct of the business of the Company and the Subsidiaries as currently
conducted infringes upon or may infringe upon or misappropriates the
Intellectual Property rights of any third party; (ii) with respect to each item
of Intellectual Property that is owned by the Company or a Subsidiary ("OWNED
INTELLECTUAL PROPERTY"), the Company or a Subsidiary is the owner of the entire
right, title and interest in and to such Owned Intellectual Property and is
entitled to use such Owned Intellectual Property in the continued operation of
its respective business; (iii) with respect to each item of Intellectual
Property that is licensed to or otherwise held or used by the Company or a
Subsidiary ("LICENSED INTELLECTUAL PROPERTY"), the Company or a Subsidiary has
the right to use such Licensed Intellectual Property in the continued operation
of its respective business in accordance with the terms of the license agreement
governing such Licensed Intellectual Property; (iv) none of the Owned
Intellectual Property has been adjudged invalid or unenforceable in whole or in
part and, to the knowledge of the Company, the Owned Intellectual Property is
valid and enforceable; (v) to the knowledge of the Company, no person is
engaging in any activity that infringes upon the Owned Intellectual Property;
(vi) to the knowledge of the Company, each license of the Licensed Intellectual
Property is valid and enforceable, is binding on all parties to such license,
17
and is in full force and effect; (vii) to the knowledge of the Company, no party
to any license of the Licensed Intellectual Property is in breach thereof or
default thereunder; (viii) the Company has taken all reasonable actions
(including executing non-disclosure and intellectual property assignment
agreements) to protect, preserve and maintain the Owned Intellectual Property;
and (ix) neither the execution of this Agreement nor the consummation of any
Transaction shall adversely affect any of the Company's rights with respect to
the Owned Intellectual Property or the Licensed Intellectual Property.
(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY" means all
U.S., state and foreign intellectual property, including all (i) patents, patent
applications and statutory invention registrations, (ii) trademarks, service
marks, trade dress, logos, trade names, corporate names, domain names and other
source identifiers, and registrations and applications for registration thereof,
(iii) copyrightable works, copyrights, and registrations and applications for
registration thereof and (iv) confidential and proprietary information,
including trade secrets and know-how.
SECTION 3.15. TAXES. (a) The Company and the Subsidiaries (i) have timely
filed or caused to be filed or will timely file or cause to be filed (taking
into account any extension of time to file granted or obtained) all material Tax
Returns required to be filed by them, and all such filed Tax Returns are true,
correct and complete in all material respects; and (ii) have timely paid or will
timely pay all material amounts of Taxes due and payable except to the extent
that such Taxes are being contested in good faith and for which the Company or
the appropriate Subsidiary has set aside adequate reserves in accordance with
GAAP. All material amounts of Taxes required to have been withheld by or with
respect to the Company and its the Subsidiaries have been or will be timely
withheld and remitted to the applicable taxing authority.
(b) There are no pending audits, examinations, investigations or other
proceedings or, to the knowledge of the Company, proposed audits, examinations,
investigations or other proceedings in respect of any Tax or Tax matter of the
Company or any Subsidiary. No deficiency for any material amount of Tax has been
asserted or assessed by any taxing authority in writing against the Company or
any Subsidiary, which deficiency has not been satisfied by payment, settled or
been withdrawn or contested in good faith and for which the Company or the
appropriate Subsidiary has set aside adequate reserves in accordance with GAAP.
There are no Tax liens on any assets of the Company or any Subsidiary (other
than any liens for Taxes not yet due and payable for which adequate reserves
have been made in accordance with GAAP or for Taxes being contested in good
faith). Neither the Company nor any Subsidiary is subject to any accumulated
earnings tax or personal holding company tax.
(c) Neither the Company nor any Subsidiary has made or is obligated to
make any payment that would not be deductible pursuant to Section 162(m) of the
Code.
(d) There are no pending or, to the knowledge of the Company, potential
claims for indemnity (other than customary indemnity under credit or any other
agreements or arrangements) against the Company or any Subsidiary (other than
against each other) under any indemnification, allocation or sharing agreement
with respect to income Taxes.
(e) Neither the Company nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency (other than pursuant to extensions of time to
file Tax Returns obtained in the ordinary course).
(f) No claim is pending by a taxing authority in a jurisdiction where the
Company or any Subsidiary does not file a Tax Return that the Company or such
Subsidiary is or may be subject to Tax by such jurisdiction.
18
(g) Neither the Company nor any Subsidiary is a party to any understanding
or arrangement described in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the
Code.
(h) There are no proposed reassessments of any property owned by the
Company and the Subsidiaries that could result in a material increase in the
amount of any Tax to which the Company or any such Subsidiary would be subject.
(i) Neither the Company nor any Subsidiary will be required to include any
item of income in, or exclude any item of deduction from, taxable income as a
result of any (1) adjustment pursuant to Section 481 of the Code, the
regulations thereunder or any similar provision under state or local Law, (2)
"CLOSING AGREEMENT" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax Law)
executed on or prior to the Closing, (3) intercompany transaction or excess loss
account described in the Treasury Regulations under Section 1502 of the Code (or
any corresponding or similar provision of state, local or foreign income Tax
Law), (4) installment sale or open transaction disposition made on or prior to
the Closing, or (5) prepaid amount received on or prior to the Closing.
(j) Neither the Company nor any Subsidiary has made an election under
Section 341(f) of the Code.
(k) For purposes of this Agreement:
(i) "TAX" or "TAXES" shall mean any and all federal, state, local and
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any
governmental or Tax authority.
(ii) "TAX RETURNS" means any and all returns, declarations, claims for
refund, or information returns or statements, reports and forms relating to
Taxes filed with any Tax authority (including any schedule or attachment
thereto) with respect to the Company or the Subsidiaries, including any
amendment thereof.
SECTION 3.16. ENVIRONMENTAL MATTERS. (a) Except as would not reasonably be
expected to have a Company Material Adverse Effect, (i) none of the Company or
any of the Subsidiaries has violated, or is in violation of, any Environmental
Law; (ii) to the knowledge of the Company, there is and has been no presence,
release or threat of release of Hazardous Substances at, on, under or affecting:
(A) any of the properties currently owned, leased or operated by the Company or
any of the Subsidiaries or, during the period of the Company's or the
Subsidiaries' ownership, lease or operation thereof, formerly owned, leased or
operated by the Company or any of the Subsidiaries, or (B) any location at which
Hazardous Substances are present for which the Company or any of the
Subsidiaries is or is allegedly liable, under conditions in the case of either
(A) or (B) that would reasonably be expected to result in a liability or
obligation to the Company or any of the Subsidiaries, or, as the Company and the
Subsidiaries are currently operated, adversely affect the revenues of the
Company or any of the Subsidiaries; (iii) the Company and the Subsidiaries have
obtained and are and have been in compliance with all, and have not violated
any, required Environmental Permits; (iv) there are no written claims pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries alleging violations of or liability or obligations under any
Environmental Law or otherwise concerning the presence or release of Hazardous
Substances; and none of the Company or any of the Subsidiaries has received any
19
written notice of, is a party to, or, to the knowledge of the Company, is
reasonably likely to be affected by any proceedings, any investigations or any
agreements concerning such matters. The Company has provided to Parent a copy of
all material studies, audits, assessments or investigations concerning
compliance with, or liability or obligations under, Environmental Law affecting
the Company or any Subsidiary that is in the possession or, to the knowledge of
the Company, control of the Company or any Subsidiary.
(b) For purposes of this Agreement:
(i) "ENVIRONMENTAL LAWS" means any Laws (including common law) of the
United States federal, state, local, non-United States, or any other
Governmental Authority, relating to (A) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (B) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (C)
pollution or protection of the environment or human health and safety as
affected by Hazardous Substances or materials containing Hazardous Substances.
(ii) "ENVIRONMENTAL PERMITS" means any permit, license registration,
approval, notification or any other authorization pursuant to Environmental Law.
(iii) "HAZARDOUS SUBSTANCES" means (A) those substances, materials or
wastes defined as toxic, hazardous, acutely hazardous, pollutants, contaminants,
or words of similar import, in or regulated under the following United States
federal statutes and any analogous state statutes, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products, including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures
thereof; (D) polychlorinated biphenyls, asbestos, molds that could reasonably be
expected to adversely affect human health, urea formaldehyde foam insulation and
radon; and (E) any substance, material or waste regulated by any Governmental
Authority pursuant to or that would reasonably be expected to result in
liability under, any Law in addition to those identified in (A) above the
primary purpose of which is the protection of the environment or human health
and safety as affected by environmental media.
SECTION 3.17. MATERIAL CONTRACTS. (a) Section 3.17(a) of the Company
Disclosure Schedule contains a list of the following Contracts to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties or assets are bound or affected as of the
date hereof:
(i) any lease of personal property providing for annual rentals of
$200,000 or more;
(ii) any Contract for the purchase of materials, supplies, goods,
services, equipment or other assets that is not terminable without material
penalty on 90 days notice by the Company or the Subsidiaries and that provides
for or is reasonably likely to require either (A) annual payments to or from the
Company and the Subsidiaries of $250,000 or more, or (B) aggregate payments to
or from the Company and the Subsidiaries of $500,000 or more;
(iii) any partnership, limited liability company agreement, joint venture
or other similar agreement or arrangement relating to the formation, creation,
operation, management or control of any partnership or joint venture;
20
(iv) any Contract (other than among consolidated Subsidiaries) under which
Indebtedness is outstanding or may be incurred or pursuant to which any property
or asset is mortgaged, pledged or otherwise subject to a Lien, or any Contract
restricting the incurrence of Indebtedness or the incurrence of Liens or
restricting the payment of dividends or the transfer of any Property (except,
with respect to the transfer of Leased Properties, restrictions contained in the
Lease Documents). "INDEBTEDNESS" means (A) indebtedness for borrowed money
(excluding any interest thereon), secured or unsecured, (B) obligations under
conditional sale or other title retention Contracts relating to purchased
property, (C) capitalized lease obligations, (D) obligations under interest rate
cap, swap, collar or similar transactions or currency hedging transactions
(valued at the termination value thereof), and (E) guarantees of any of the
foregoing of any other person;
(v) any Contract required to be filed as an exhibit to the Company's
Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act;
(vi) any Contract that purports to limit in any material respect the right
of the Company or the Subsidiaries (A) to engage in any line of business, or (B)
to compete with any person or operate in any location;
(vii) any Contract to which the Company or any of its Subsidiaries has
continuing indemnification obligations or potential liability under any purchase
price adjustment;
(viii) any Contract providing for the sale or exchange of, or option to
sell or exchange, any Property, or for the purchase or exchange of, or option to
purchase or exchange, any real estate;
(ix) any Contract for the acquisition or disposition, directly or
indirectly (by merger or otherwise), of assets (other than Contracts referenced
in clause (viii) of this Section 3.17(a)) or capital stock or other equity
interests of another person for aggregate consideration in excess of $250,000,
in each case other than in the ordinary course of business and in a manner
consistent with past practice;
(x) other than Contracts for ordinary repair and maintenance, any Contract
relating to the development or construction of, or additions or expansions to,
the Properties, under which the Company or any of the Subsidiaries has, or
expects to incur, an obligation in excess of $50,000 per site or $125,000 in the
aggregate;
(xi) any advertising or other promotional Contract providing for payment
by the Company or any Subsidiary of $100,000 or more;
(xii) any license, royalty or other Contract concerning Intellectual
Property which is material to the Company and the Subsidiaries; and
(xiii) any Contract which by its terms calls for payments by the Company
and the Subsidiaries in excess of $2,500,000.
(the Contracts described in clauses (i) through (xiii) and those required to be
identified in Sections 3.11(a), 3.13(a), 3.13(b), 3.13(g), 3.13(h), 3.13(i),
3.13(l) and 3.17(c) of the Company Disclosure Schedule, in each case together
with all exhibits and schedules thereto being, the "MATERIAL CONTRACTS").
(b) Except as would not reasonably be expected to have a Company Material
Adverse Effect, (i) neither the Company nor any of its Subsidiaries is and, to
the Company's knowledge, no other party is in breach or violation of, or default
under, any Material Contract, (ii) none of the Company or any of the
Subsidiaries have received any claim of default under any such agreement, and
(iii) to the Company's knowledge, no event has occurred which would result in a
21
breach or violation of, or a default under, any Material Contract (in each case,
with or without notice or lapse of time or both). Except as would not reasonably
be expected to have a Company Material Adverse Effect, each Material Contract is
valid, binding and enforceable in accordance with its terms and is in full force
and effect. The Company has made available to Parent true and complete copies of
all Material Contracts, including any amendments thereto.
(c) Except as disclosed in the Company's proxy statement relating to the
election of directors dated April 20, 2004, there are no Contracts or
transactions between the Company or any Subsidiary, on the one hand, and any (i)
officer or director of the Company or any Subsidiary, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company, or (iii)
associate (as defined in Rule 12b-2 under the Exchange Act) or affiliate of any
such officer, director or record or beneficial owner, on the other hand, except
those of a type available to employees generally.
SECTION 3.18. INSURANCE. Section 3.18 of the Company Disclosure Schedule
sets forth a complete and correct list of all material insurance policies owned
or held by the Company and each Subsidiary, true and complete copies of which
have been made available to Parent. With respect to each such insurance policy,
except as would not reasonably be expected to have a Company Material Adverse
Effect: (i) the policy is legal, valid, binding and enforceable in accordance
with its terms and, except for policies that have expired under their terms in
the ordinary course, is in full force and effect; (ii) neither the Company nor
any Subsidiary is in breach or default (including any such breach or default
with respect to the payment of premiums or the giving of notice), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination or modification, under the policy;
(iii) to the knowledge of the Company, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or liquidation;
(iv) no notice of cancellation or termination has been received; and (v) the
policy is sufficient for compliance with all requirements of Law and of all
Contracts to which the Company or the Subsidiaries are parties or otherwise
bound.
SECTION 3.19. BOARD APPROVAL; VOTE REQUIRED. (a) The Company Board, by
resolutions duly adopted at a meeting duly called and held, has duly (i)
determined that this Agreement, the Merger and the other Transactions are fair
to and in the best interests of the Company and its stockholders, (ii) approved
this Agreement, the Merger and the other Transactions and declared their
advisability, and (iii) recommended that the stockholders of the Company adopt
this Agreement and directed that this Agreement be submitted for consideration
by the Company's stockholders at the Company Stockholders' Meeting
(collectively, the "COMPANY BOARD RECOMMENDATION"). The approval of this
Agreement, the Merger and the other Transactions by the Company Board
constitutes approval of this Agreement, the Merger and the other Transactions
for purposes of each of Section 203 of the DGCL and Article Tenth of the
Certificate of Incorporation of the Company and represents the only action
necessary to ensure that Section 203 of the DGCL and Article Tenth of the
Certificate of Incorporation of the Company do not and will not apply to the
execution and delivery of this Agreement or the consummation of the
Transactions.
(b) Except as contemplated by Section 2.06, the only vote of the holders
of any class or series of capital stock or other securities of the Company
necessary to approve this Agreement, the Merger and the other Transactions is
the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock in favor of the adoption of this Agreement (the
"STOCKHOLDER APPROVAL").
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Between the date of the
Company's last annual meeting proxy statement filed with the SEC and the date of
this Agreement, no event has occurred that would be required to be reported by
the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
22
SECTION 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Bear, ▇▇▇▇▇▇▇ & Co. Inc. to the effect that, as of the date of this
Agreement, the Merger Consideration is fair, from a financial point of view, to
the Company's stockholders. An executed copy of such opinion has been delivered
to Parent.
SECTION 3.22. BROKERS. No broker, finder or investment banker (other than
Bear, ▇▇▇▇▇▇▇ & Co. Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has furnished to Parent a complete and
correct copy of any Contract between the Company and Bear, ▇▇▇▇▇▇▇ & Co. Inc.
pursuant to which Bear, ▇▇▇▇▇▇▇ & Co. Inc. could be entitled to any payment from
the Company relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 4.01. CORPORATE ORGANIZATION. Each of Parent and Merger Sub is a
limited liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
limited liability company power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, prevent or materially
delay consummation of any of the Transactions or otherwise prevent or materially
delay Parent or Merger Sub from performing their obligations under this
Agreement.
SECTION 4.02. CERTIFICATE OF FORMATION AND LIMITED LIABILITY COMPANY
AGREEMENT. Parent has heretofore furnished to the Company a complete and correct
copy of the Certificate of Formation and Limited Liability Company Agreement (or
similar organizational documents) of Parent and Merger Sub, each as amended to
date. Such Certificate of Formation and Limited Liability Company Agreement (or
similar organizational documents) are in full force and effect. Neither Parent
nor Merger Sub is in violation of any of the provisions of its Certificate of
Formation or Limited Liability Company Agreement (or similar organizational
documents).
SECTION 4.03. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary limited liability company power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution, delivery and performance of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the Transactions have been duly and validly authorized by all necessary
limited liability company action, and no other limited liability company
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency (including all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to the effect of general principles of
equity.
SECTION 4.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub and the consummation
by Parent and Merger Sub of the Transactions will not, (i) conflict with or
23
violate the Certificate of Formation or Limited Liability Company Agreement (or
similar organizational documents) of Parent or Merger Sub, (ii) assuming that
all consents, approvals, authorizations and other actions described in Section
4.04(b) have been obtained and all filings and obligations described in Section
4.04(b) have been made, conflict with or violate any Law applicable to Parent or
Merger Sub or by which any property or asset of either of them is bound or
affected, or (iii) result in any breach or violation of, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Parent or Merger Sub pursuant to, any Contract to which
Parent or Merger Sub is a party or by which Parent or Merger Sub or any property
or asset of either of them is bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent or
materially delay Parent and Merger Sub from performing their obligations under
this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the Transactions will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except for (i) applicable requirements, if any,
of the Exchange Act, (ii) the filing and recordation of appropriate merger
documents as required by the DGCL and appropriate documents with the relevant
authorities of other states in which the Company or any of the Subsidiaries is
qualified to do business, (iii) any state or federal Laws governing the sale of
liquor that may be applicable, and (iv) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent
Parent or Merger Sub from performing their material obligations under this
Agreement.
SECTION 4.05. INFORMATION SUPPLIED. None of the information supplied by
Parent or Merger Sub for inclusion in the Proxy Statement or the Offer Documents
will, in the case of the Proxy Statement at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting or at
the time of any amendment or supplement thereof, or in the case of the Offer
Documents, at the time the Offer Documents are first published, sent or given to
holders of the Notes, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. No representation is made by Parent or Merger Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the Company in connection with the preparation of the
Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein.
SECTION 4.06. ABSENCE OF LITIGATION. As of the date of this Agreement,
there is no Action pending or, to the knowledge of the officers of Parent,
threatened, against Parent or any of its affiliates before any Governmental
Authority that would or seeks to materially delay or prevent the consummation of
any of the Transactions. As of the date of this Agreement, neither Parent nor
any of its affiliates is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of the officers of Parent, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that would or seeks to
materially delay or prevent the consummation of any of the Transactions.
24
SECTION 4.07. OPERATIONS OF MERGER SUB. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
SECTION 4.08. FINANCING. Parent has delivered to the Company true and
complete copies of (a) an executed commitment letter from Blackstone Real Estate
Partners IV L.P. to provide equity financing in an aggregate amount of
$172,500,000 (the "EQUITY FUNDING LETTER"), and (b) an executed commitment
letter (the "COMMITMENT LETTER") from Bank of America, N.A. pursuant to which
Bank of America, N.A. has committed to provide Merger Sub and certain existing
or future affiliates of Merger Sub with financing in an aggregate amount of
$680,000,000 (the "DEBT FINANCING" and together with the financing referred to
in clause (a) being collectively referred to as the "FINANCING"). Each of the
Equity Funding Letter and the Commitment Letter, in the form so delivered, is
valid and in full force and effect as of the date hereof. No event has occurred
which, with or without notice, lapse of time or both, would constitute a default
on the part of Parent under either the Equity Funding Letter or the Commitment
Letter. Parent has fully paid any and all commitment fees or other fees required
by the Commitment Letter to be paid as of the date hereof. Parent shall have at
the Closing and at the Effective Time proceeds in connection with the Financing
in an amount equal to $852,500,000.
SECTION 4.09. GUARANTEE. Concurrently with the execution of this
Agreement, Parent has delivered to the Company the duly executed guarantee of
Blackstone Real Estate Partners IV L.P. (the "GUARANTOR") in the form attached
as EXHIBIT B to this Agreement (the "GUARANTEE"). The Guarantee is valid and in
full force and effect, and no event has occurred which, with or without notice,
lapse of time or both, would constitute a default on the part of Guarantor under
the Guarantee.
SECTION 4.10. BROKERS. The Company will not be responsible for any
brokerage, finder's or other fee or commission to any broker, finder or
investment banker in connection with the Transactions based upon arrangements
made by or on behalf of Parent or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as expressly contemplated by this Agreement or as set forth in Section
5.01 of the Company Disclosure Schedule, the businesses of the Company and the
Subsidiaries shall be conducted only in, and the Company and the Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable Law, and
the Company shall, and shall cause each of the Subsidiaries to, use its
reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries, to preserve the assets and
properties of the Company and the Subsidiaries in good repair and condition and
to preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any Subsidiary
has material business relations, in each case in the ordinary course of business
and in a manner consistent with past practice. By way of amplification and not
limitation, except as expressly contemplated by any other provision of this
Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule,
the Company agrees that neither the Company nor any Subsidiary shall, between
the date of this Agreement and the Effective Time, directly or indirectly, do,
or propose to do, any of the following without the prior written consent of
Parent:
(a) amend or otherwise change its Certificate of Incorporation or Bylaws;
25
(b) issue, sell, pledge, dispose of, grant, encumber, license or otherwise
subject to any Lien, or authorize such issuance, sale, pledge, disposition,
grant or encumbrance of or subjection to such Lien, (i) any shares of any class
of capital stock of the Company or any Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including any phantom interest),
of the Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to employee stock options outstanding on the date hereof and granted
under Company Stock Option Plans as in effect on the date hereof in the ordinary
course of business and in a manner consistent with past practice), or (ii) any
Properties or other assets of the Company or any Subsidiary, except assets
(other than Properties) that are not material in the ordinary course of business
and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except for dividends by any direct or indirect wholly owned
Subsidiary to the Company or any other Subsidiary;
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any capital stock of the Company or
any Subsidiary;
(e) (i) acquire (including by merger, consolidation, or acquisition of
stock or assets or any other business combination) any corporation, partnership,
other business organization (or any division thereof) or any property or asset,
except assets (other than real property) in the ordinary course of business and
in a manner consistent with past practice, and other assets (other than real
property) that do not exceed $1,500,000 in the aggregate; (ii) repurchase, repay
or incur any Indebtedness, or issue any debt securities or assume or endorse, or
otherwise become responsible for, the obligations of any person, or make any
loans or advances, or grant any security interest in any of its assets; (iii)
authorize, or make any commitment with respect to, any capital expenditure,
other than maintenance expenditures at existing Properties in the ordinary
course of business and consistent with past practice; (iv) acquire, enter into
or extend any option to acquire, or exercise an option to acquire, real property
or commence construction of, or enter into any Contract to develop or construct,
other real estate projects; (v) enter into any new line of business; (vi) expend
or utilize any portion of the Initial Reserve Amount or the Secondary Reserve
Amount, or (vii) make investments in persons other than wholly owned
subsidiaries;
(f) (i) increase the compensation payable or to become payable or the
benefits provided to its current or former directors, officers or employees,
except for increases in compensation in the ordinary course of business and in a
manner consistent with past practice; (ii) grant any retention, severance or
termination pay to, or enter into any employment, bonus, change of control or
severance agreement with, any current or former director, officer or other
employee of the Company or of any Subsidiary; (iii) establish, adopt, enter
into, terminate or amend any Plan or establish, adopt or enter into any plan,
agreement, program, policy, trust, fund or other arrangement that would be a
Plan if it were in existence as of the date of this Agreement for the benefit of
any director, officer or employee except as required by Law; (iv) loan or
advance any money or other property to any current or former director, officer
or employee of the Company or the Subsidiaries; or (v) grant any equity or
equity based awards (PROVIDED that equity awards may be transferred in
accordance with the terms of the applicable plan document or agreement);
(g) make any change (or file for such change) in any method of Tax
accounting;
(h) make, change or rescind any material Tax election, file any amended
Tax Return, except as required by applicable Law, enter into any closing
agreement relating to Taxes, waive or extend the statute of limitations in
respect of Taxes (other than pursuant to extensions of time to file Tax Returns
obtained in the ordinary course of business) or settle or compromise any
material United States federal, state or local income Tax liability, audit,
claim or assessment, or surrender any right to claim for a Tax Refund;
26
(i) pay, discharge, waive, settle or satisfy any claim, liability or
obligation that is not an Action, other than repayments of Indebtedness under
the Credit Agreement and the payment, discharge, waiver, settlement or
satisfaction, in the ordinary course of business and consistent with past
practice;
(j) waive, release, assign, settle or compromise any pending or threatened
Action (i) requiring payment by the Company or any Subsidiary in excess of
$100,000 individually or $500,000 in the aggregate or (ii) that is brought by
any current, former or purported holder of any securities of the Company in its
capacity as such and that (A) requires any payment to such security holders by
the Company or any Subsidiary or (B) adversely affects in any material respect
the ability of the Company and the Subsidiaries to conduct their business in a
manner consistent with past practice;
(k) other than in the ordinary course of business and in a manner
consistent with past practice, (i) amend, modify or consent to the termination
of any Material Contract other than the terms and conditions of the Stock Option
Plans required to effectuate the provisions set forth in Section 2.04 or (ii)
amend, waive, modify or consent to the termination of the Company's or any
Subsidiary's rights thereunder; PROVIDED that the exception set forth above
shall not be applicable to any Third Party Flag Agreement, Franchise Agreement
or Management Agreement;
(l) make any expenditure in connection with any advertising or marketing,
or adopt, renew, terminate, change, or increase the liability or other
obligations of the Company or any Subsidiary under, any operating standards,
loyalty programs or amenity packages relating to the Prime Hotels and Resorts,
AmeriSuites or Wellesley Inns & Suites brands;
(m) fail to maintain in full force and effect the existing insurance
policies covering the Company and the Subsidiaries and their respective
properties, assets and businesses or fail to preserve or protect their rights in
all material Intellectual Property used in the business of the Company or its
Subsidiaries;
(n) enter into, amend, modify or consent to the termination of any
Contract that would be a Material Contract or transaction that would be required
to be set forth in Section 3.17(c) of the Company Disclosure Schedule if in
effect on the date of this Agreement;
(o) effectuate a "plant closing" or "mass layoff," as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988; or
(p) announce an intention, enter into any formal or informal agreement or
otherwise make a commitment, to do any of the foregoing.
SECTION 5.02. CONDUCT OF BUSINESS BY PARENT AND MERGER SUB PENDING THE
MERGER. Each of Parent and Merger Sub agrees that, between the date of this
Agreement and the Effective Time, it shall not, directly or indirectly, (a) take
any action to cause its representations and warranties set forth in Article IV
to be untrue in any material respect; or (b) take any action that would
reasonably be likely to materially delay the consummation of the Transactions.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PROXY STATEMENT. As promptly as practicable following the
date of this Agreement (but in any event within 10 business days unless the
parties shall otherwise agree), the Company shall prepare and file with the SEC
the preliminary Proxy Statement. Each of the Company and Parent shall furnish
all information concerning itself and its affiliates that is required to be
included in the Proxy Statement or that is customarily included in proxy
statements prepared in connection with transactions of the type contemplated by
this Agreement. Each of the Company and Parent shall use its reasonable best
efforts to respond as promptly as practicable to any comments of the SEC with
respect to the Proxy Statement, and the Company shall use its reasonable best
efforts to cause the definitive Proxy Statement to be mailed to the Company's
stockholders as promptly as reasonably practicable after the date of this
Agreement. The Company shall promptly notify Parent upon the receipt of any
comments from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy Statement and shall provide Parent with
copies of all correspondence between the Company and its Representatives, on the
one hand, and the SEC and its staff, on the other hand relating to the Proxy
Statement. If at any time prior to the Company Stockholders' Meeting, any
information relating to the Company, Parent or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement,
so that the Proxy Statement shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, the party which discovers such
information shall promptly notify the other parties, and an appropriate
amendment or supplement describing such information shall be filed with the SEC
and, to the extent required by applicable Law, disseminated to the stockholders
of the Company. Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement (or any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto, the Company shall
provide Parent an opportunity to review and comment on such document or response
and shall include in such document or response comments reasonably proposed by
Parent; PROVIDED, HOWEVER, that in the event of a Change in Board
Recommendation, the Company shall consider in good faith including in such
document or response comments reasonably proposed by Parent.
SECTION 6.02. COMPANY STOCKHOLDERS' MEETING. The Company shall duly call,
give notice of, convene and hold a meeting of its stockholders (the "COMPANY
STOCKHOLDERS' MEETING"), as promptly as practicable after the date of this
Agreement, for the purpose of obtaining the Stockholder Approval. Unless this
Agreement shall have been terminated in accordance with Section 8.01, the
Company shall hold the Company Stockholders' Meeting regardless of whether the
Company Board has effected a Change in Board Recommendation. Subject to Section
6.04(c), the Company Board shall (a) recommend to holders of the Shares that
they adopt this Agreement, (b) include such recommendation in the Proxy
Statement and (c) use its reasonable best efforts to solicit and obtain the
Stockholder Approval.
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
otherwise prohibited by applicable Law or the terms of any Contract entered into
prior to the date hereof or would be reasonably expected to violate any
attorney-client privilege, from the date of this Agreement until the Effective
Time, the Company shall (and shall cause the Subsidiaries to), at Parent's
expense: (i) provide to Parent and to the officers, directors, employees,
accountants, consultants, legal counsel, financing sources, agents and other
representatives (collectively, "REPRESENTATIVES") of Parent reasonable access,
during normal business hours and upon reasonable prior notice by Parent, to the
officers, employees, agents, properties, offices and other facilities of the
Company and the Subsidiaries and to the books and records thereof, and (ii)
furnish promptly to Parent such information concerning the business, properties,
Contracts, assets, liabilities, personnel and other aspects of the Company and
28
the Subsidiaries as Parent or its Representatives may reasonably request.
Without limiting the foregoing, Parent and its Representatives (including its
financing sources) shall have the right to conduct appraisal and environmental
and engineering inspections of each of the Properties, PROVIDED, HOWEVER, (A)
that unless reasonably required by the financing sources in connection with the
Debt Financing, neither Parent nor its Representatives shall have the right to
take and analyze any samples of any environmental media (including soil,
groundwater, surface water, air or sediment) or any building material or to
perform any invasive testing procedure on any building; and that any such taking
and analyzing of samples or any such performance of invasive testing conducted
pursuant to this Section 6.03 shall be reasonably acceptable to the Company,
implemented in a manner that does not disrupt the operations of the Company or
any of the Subsidiaries, and paid for by Parent at Parent's sole cost and
expense; and that Parent, at Parent's sole cost and expense, shall return any
site at which or from which, or that has otherwise been affected by, any taking
and analyzing of samples or performance of invasive testing conducted pursuant
to this Section 6.03, in all material respects, to the condition existing at
such site prior to the taking and analyzing of samples or performance of
invasive testing, and (B) Parent and Merger Sub shall, on a joint and several
basis, indemnify and hold harmless the Company, the Subsidiaries and their
respective Representatives for and against any and all liabilities, losses,
damages, claims, costs, expenses, interest, awards, judgments and penalties
suffered or incurred by them arising out of any personal injury or physical
damage resulting from any appraisal or inspection conducted pursuant to this
Section 6.03, except that, Parent and Merger Sub shall have no obligation to so
indemnify or hold harmless to the extent any such liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments or penalties result from
the negligence of the Company, the Subsidiaries, or one of their
Representatives.
(b) All information obtained by Parent or its Representatives pursuant to
this Section 6.03 shall be kept confidential in accordance with the
confidentiality agreement, dated July 12, 2004 (the "CONFIDENTIALITY
AGREEMENT"), between Blackstone Real Estate Acquisitions IV L.L.C. and the
Company.
(c) No investigation pursuant to this Section 6.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) The Company agrees that
neither it nor any Subsidiary shall, nor shall it authorize or permit the
Representatives of the Company or the Subsidiaries to, directly or indirectly,
(i) solicit or initiate or knowingly encourage or otherwise knowingly facilitate
(including by way of furnishing information) any inquiries or the implementation
or submission of any Acquisition Proposal, or (ii) participate in discussions or
negotiations regarding, or furnish to any person any non-public information in
connection with, any Acquisition Proposal; PROVIDED, HOWEVER, that, prior to the
adoption of this Agreement by the Company's stockholders at the Company
Stockholders' Meeting, nothing contained in this Agreement shall prevent the
Company or the Company Board from furnishing information to, or engaging in
negotiations or discussions with, any person in connection with an unsolicited
bona fide written Acquisition Proposal by such person, if and only to the extent
that prior to taking such action (A) the Company Board believes in good faith
(after consultation with its advisors) that such Acquisition Proposal is, or
could reasonably be expected to result in, a Superior Proposal, and the Company
Board determines in good faith (after consultation with its outside legal
counsel) that it is required to do so in order to comply with its fiduciary
duties to the stockholders of the Company under applicable Law, and (B) the
Company Board receives from such person an executed confidentiality agreement,
the terms of which are substantially similar to and no less favorable to the
Company than those contained in the Confidentiality Agreement. Neither the
Company nor any Subsidiary shall enter into any letter of intent, acquisition
agreement or similar agreement with respect to an Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04(a)).
29
(b) The Company shall notify Parent as promptly as practicable (and in any
event within 48 hours) of the receipt by the Company or any of the Subsidiaries,
or any of its or their respective Representatives, of any bona fide inquiries,
proposals or offers, requests for information or requests for discussions or
negotiations regarding any Acquisition Proposal, specifying the material terms
and conditions thereof and the identity of the party making such proposal. The
Company shall keep Parent reasonably informed of the status of any such
discussions or negotiations and of any modifications to such inquiries,
proposals or offers (the Company agreeing that it shall not, and shall cause the
Subsidiaries not to, enter into any confidentiality agreement with any person
subsequent to the date of this Agreement which prohibits the Company from
providing such information to Parent). The Company agrees that neither it nor
any of the Subsidiaries shall terminate, waive, amend or modify any provision of
any existing standstill or confidentiality agreement to which it or any of the
Subsidiaries is a party and that it and the Subsidiaries shall enforce the
provisions of any such agreement. The Company shall, and shall cause the
Subsidiaries and its and their Representatives to, immediately cease and cause
to be terminated any discussions or negotiations with any parties that may be
ongoing with respect to any Acquisition Proposal as of the date hereof, shall
take reasonable steps to inform its and the Subsidiaries' Representatives of the
obligations undertaken in this Section 6.04 and shall request that all
confidential information previously furnished to any such third parties be
returned promptly.
(c) Except as set forth in this Section 6.04, the Company Board (or any
committee thereof) shall not, and shall not publicly propose to, (i) withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation of this Agreement, the Merger or the other Transactions by the
Company Board (or any committee thereof); (ii) approve or recommend any
Acquisition Proposal; or (iii) approve any letter of intent, acquisition
agreement or similar agreement with respect to any Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04).
Notwithstanding the foregoing, prior to the adoption of this Agreement by the
Company's stockholders at the Company Stockholders Meeting, (x) in response to
the receipt of an unsolicited bona fide written Acquisition Proposal, if the
Company Board (A) determines in good faith (after consultation with its
advisors) that such Acquisition Proposal is a Superior Proposal and (B)
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
approve and recommend such Superior Proposal and, in connection with such
Superior Proposal, withdraw or modify the Company Board Recommendation or (y)
other than in connection with an Acquisition Proposal, if the Company Board
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
withdraw or modify the Company Board Recommendation (either event described in
the foregoing clauses (x) and (y), a "CHANGE IN BOARD RECOMMENDATION").
(d) Nothing contained in this Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act or from making any disclosure to
the Company's stockholders if the Company Board (or any committee thereof)
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so under applicable Law; PROVIDED, HOWEVER, that
neither the Company nor the Company Board (nor any committee thereof) shall (i)
recommend that the stockholders of the Company tender their Shares in connection
with any such tender or exchange offer (or otherwise approve or recommend any
Acquisition Proposal) or (ii) withdraw or modify the Company Board
Recommendation, unless in each case the requirements of Section 6.04(c) shall
have been satisfied.
(e) The Company shall not take any action to exempt any person from the
restrictions on "business combinations" contained in Section 203 of the DGCL (or
any similar provision) or in Article Tenth of the Certificate of Incorporation
of the Company or otherwise cause such restrictions not to apply.
30
(f) Except as set forth in Section 8.03(d) with respect to an Acquisition
Proposal, for purposes of this Agreement:
(i) "ACQUISITION PROPOSAL" means any proposal or offer (including any
proposal from or to the Company's stockholders) from any person other than
Parent or Merger Sub relating to (1) any direct or indirect acquisition of (A)
more than 15% of the assets of the Company and its consolidated Subsidiaries,
taken as a whole or (B) over 15% of any class of equity securities of the
Company; (2) any tender offer or exchange offer, as defined pursuant to the
Exchange Act, that if consummated, would result in any person beneficially
owning 15% or more of any class of equity securities of the Company; or (3) any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or other similar transaction involving the Company.
(ii) "SUPERIOR PROPOSAL" means any bona fide written Acquisition Proposal
not solicited or initiated in violation of Section 6.04(a) that (i) relates to
more than 50% of the outstanding Shares or all or substantially all of the
assets of the Company and the Subsidiaries taken as a whole, (ii) is on terms
that the Company Board determines in its good faith judgment (after receiving
the advice of its financial advisor and after taking into account all the terms
and conditions of the Acquisition Proposal) are more favorable to the Company's
stockholders (in their capacities as stockholders) from a financial point of
view than this Agreement (including any alterations to this Agreement agreed to
in writing by Parent in response thereto) and (iii) which the Company Board
determines is reasonably capable of being consummated.
SECTION 6.05. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
The Limited Liability Company Agreement (or similar organizational document) of
the Surviving Company shall contain provisions no less favorable with respect to
indemnification than are set forth in Article Eighth of the Certificate of
Incorporation of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who, at
or prior to the Effective Time, were directors, officers, employees, fiduciaries
or agents of the Company or any of the Subsidiaries.
(b) After the Effective Time, Parent and the Surviving Company shall,
jointly and severally, to the fullest extent permitted under applicable Law,
indemnify and hold harmless, each present and former director and officer of the
Company and each Subsidiary (collectively, the "INDEMNIFIED PARTIES") against
all costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, occurring on or
before the Effective Time, to the same extent as provided in the Certificate of
Incorporation of the Company or any other applicable contract or agreement in
effect on the date hereof. In the event of any such claim, action, suit,
proceeding or investigation, (i) Parent or the Surviving Company shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Company,
promptly after statements therefor are received (provided the applicable
Indemnified Party provides an undertaking to repay all advanced expenses if it
is finally judicially determined that such Indemnified Party is not entitled to
indemnification) and (ii) the Surviving Company shall cooperate in the defense
of any such matter; PROVIDED, HOWEVER, that neither Parent nor the Surviving
Company shall be liable for any settlement effected without the Surviving
Company's written consent (which consent shall not be unreasonably withheld or
delayed); and PROVIDED, FURTHER, that neither Parent nor the Surviving Company
shall be obligated pursuant to this Section 6.05(b) to pay the fees and expenses
of more than one counsel (selected by a plurality of the applicable Indemnified
Parties) for all Indemnified Parties in any jurisdiction with respect to any
single action except to the extent that two or more of such Indemnified Parties
31
shall have conflicting interests in the outcome of such action; and PROVIDED,
FURTHER, that, in the event that any claim for indemnification is asserted or
made within such six year period, all rights to indemnification in respect of
such claim shall continue until the disposition of such claim.
(c) The Surviving Company shall either (i) cause to be obtained at the
Effective Time "tail" insurance policies with a claims period of at least six
years from the Effective Time with respect to directors' and officers' liability
insurance in amount and scope at least as favorable as the Company's existing
policies for claims arising from facts or events that occurred on or prior to
the Effective Time; or (ii) maintain in effect for six years from the Effective
Time, if available, the current directors' and officers' liability insurance
policies maintained by the Company (PROVIDED that the Surviving Company may
substitute therefor policies of at least the same coverage containing terms and
conditions that are not less favorable) with respect to matters occurring prior
to the Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving
Company be required to expend pursuant to this Section 6.05(c) more than an
amount per year equal to 250% of current annual premiums paid by the Company for
such insurance; PROVIDED, HOWEVER, that in the event of an expiration,
termination or cancellation of such current policies, Purchaser or the Surviving
Company shall be required to obtain as much coverage as is possible under
substantially similar policies for such maximum annual amount in aggregate
annual premiums. The Company represents that such current annual premium amount
is set forth in Section 6.05(c) of the Company Disclosure Schedule.
(d) In the event Parent or the Surviving Company or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Company, as the case may be, shall succeed to the obligations set
forth in this Section 6.05.
(e) Parent shall cause the Surviving Company to perform all of the
obligations of the Surviving Company under this Section 6.05.
SECTION 6.06. EMPLOYEE BENEFITS MATTERS. (a) Parent hereby agrees that,
for a period of two years immediately following the Effective Time, it shall, or
it shall cause the Surviving Company and its subsidiaries to, (i) provide each
employee of the Company as of the Effective Time (each, an "EMPLOYEE") with at
least the same level of base salary, cash incentive compensation and other cash
variable compensation that was provided to each such Employee immediately prior
to the Effective Time, and (ii) provide the Employees with employee benefits
(other than equity-based compensation) that are no less favorable in the
aggregate than those provided to such Employees immediately prior to the
Effective Time. Parent hereby agrees that, except as set forth in Section
6.06(a) of the Company Disclosure Schedule, it shall, or shall cause the
Surviving Company to, maintain the bonus plan set forth in Section 6.06(a) of
the Company Disclosure Schedule in respect of calendar year 2004 in accordance
with the terms of such plan as in effect on the date of this Agreement
(including with respect to the timing of payment of bonuses) and, prior to the
Effective Time, the Company agrees that such plan will be maintained in
accordance with its terms (including with respect to the timing of payment of
bonuses). From and after the Effective Time, Parent shall cause the Surviving
Company and its subsidiaries to honor in accordance with their terms, all
contracts, agreements, arrangements, policies, plans and commitments of the
Company and the Subsidiaries as in effect immediately prior to the Effective
Time that are applicable to any current or former employees or directors of the
Company or any Subsidiary.
(b) Employees shall receive credit for all purposes (including, for
purposes of eligibility to participate, vesting, benefit accrual and eligibility
to receive benefits, but excluding benefit accruals under any defined benefit
pension plan) under any employee benefit plan, program or arrangement (including
32
vacation plans, programs and arrangements) established or maintained by Parent,
the Surviving Company or any of their respective subsidiaries under which each
Employee may be eligible to participate on or after the Effective Time for
service with the Company and its Subsidiaries through the Effective Time to the
same extent recognized by the Company or any of the Subsidiaries under
comparable Plans immediately prior to the Effective Time. Such plan, program or
arrangement shall credit each such Employee for service accrued or deemed
accrued on or prior to the Effective Time with the Company or any Subsidiary;
PROVIDED, HOWEVER, that such crediting of service shall not operate to duplicate
any benefit or the funding of any such benefit.
(c) Notwithstanding anything to the contrary in this Agreement, Parent
agrees that it shall, or shall cause the Surviving Company to, provide severance
benefits to each Employee employed at the Company's executive offices who is
terminated during the one year period immediately following the Effective Time
in an amount calculated as set forth in Section 6.06(c) of the Company
Disclosure Schedule.
(d) With respect to the welfare benefit plans, programs and arrangements
maintained, sponsored or contributed to by Parent or the Surviving Company
("PURCHASER WELFARE BENEFIT PLANS") in which an Employee may be eligible to
participate on or after the Effective Time, Parent shall (a) waive, or cause its
insurance carrier to waive, all limitations as to preexisting and at-work
conditions, if any, with respect to participation and coverage requirements
applicable to each Employee under any Purchaser Welfare Benefit Plan to the same
extent waived under a comparable Plan, and (b) provide credit to each Employee
for any co-payments, deductibles and out-of-pocket expenses paid by such
Employee under the Plans during the relevant plan year, up to and including the
Effective Time.
SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which could reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, in the case of representations or warranties
not qualified by any "material" or "Company Material Adverse Effect" qualifier,
or in any respect, in the case of representations or warranties qualified by the
"material" or "Company Material Adverse Effect" qualifier, and (b) any failure
of the Company, Parent or Merger Sub, as the case may be, to comply with or
satisfy any covenant or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.07 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. In addition, the Company shall
give prompt written notice to Parent, and Parent shall give prompt written
notice to the Company, of any notice or other communication (i) from any person
and the response thereto of the Company or the Subsidiaries or Parent, as the
case may be, or its or their Representatives alleging that the consent of such
person is or may be required in connection with this Agreement or the
Transactions, (ii) from any Governmental Authority and the response thereto of
the Company or the Subsidiaries or Parent, as the case may be, or its or their
Representatives in connection with this Agreement or the Transactions, and (iii)
except in the event the Company Board shall have effected a Change of Board
Recommendation, from or to the SEC.
SECTION 6.08. FINANCING. (a) Parent shall use its reasonable best efforts
to arrange the Debt Financing on the terms and conditions described in the Debt
Commitment Letter, including using reasonable best efforts to (i) negotiate
definitive agreements with respect thereto on terms and conditions contained
therein and (ii) to satisfy all conditions applicable to Parent and Merger Sub
in such definitive agreements that are within its control. In the event any
portion of the Debt Financing becomes unavailable on the terms and conditions
contemplated in the Debt Commitment Letter, Parent shall use its reasonable best
efforts to arrange to obtain any such portion from alternative sources on
comparable or more favorable terms to Parent (as determined in the reasonable
judgment of Parent). Parent shall give the Company prompt notice of any material
breach by any party of the Debt Commitment Letter or any termination of the Debt
Commitment Letter. Parent shall keep the Company informed on a reasonably
33
current basis in reasonable detail of the status of its efforts to arrange the
Financing and shall not permit any material amendment or modification to be made
to, or any waiver of any material provision or remedy under, the Commitment
Letters without consulting with the Company.
(b) The Company agrees to provide, and shall cause the Subsidiaries and
its and their Representatives to provide, all reasonable cooperation in
connection with the arrangement of the Debt Financing as may be reasonably
requested by Parent (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of the Company and the
Subsidiaries), including (i) participation in meetings, drafting sessions and
due diligence sessions, (ii) furnishing Parent and its financing sources with
financial and other pertinent information regarding the Company as may be
reasonably requested by Parent, (iii) assisting Parent and its financing sources
in the preparation of (A) an offering document for any debt raised to complete
the Merger and (B) materials for rating agency presentations, (iv) reasonably
cooperating with the marketing efforts of Parent and its financing sources for
any debt raised by Parent to complete the Merger and (v) providing and executing
documents as may be reasonably requested by Parent; PROVIDED that none of the
Company or any Subsidiary shall be required to pay any commitment or other
similar fee or incur any other liability in connection with the Debt Financing
prior to the Effective Time. Parent shall, promptly upon request by the Company,
reimburse the Company for all reasonable out-of-pocket costs incurred by the
Company or the Subsidiaries in connection with such cooperation. Parent and
Merger Sub shall, on a joint and several basis, indemnify and hold harmless the
Company, the Subsidiaries and their respective Representatives for and against
any and all liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties suffered or incurred by them in connection with
the arrangement of the Debt Financing and any information utilized in connection
therewith (other than historical information relating to the Company or the
Subsidiaries).
(c) All non-public or otherwise confidential information regarding the
Company obtained by Parent or its Representatives pursuant to Section 6.08(b)
shall be kept confidential in accordance with the Confidentiality Agreement.
(d) Within 60 days of there having occurred after the date of this
Agreement (i) any general suspension of trading in, or limitation on prices for,
securities on the NYSE for three or more consecutive business days, including
but not limited to any changes in trading conditions resulting from actual or
threatened terrorist attacks, responses by the United States or its allies
thereto, or the effects thereof; (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or New York
for three or more consecutive business days; (iii) the commencement or material
escalation of a war, armed hostilities or other international or national crisis
or security event directly or indirectly involving the United States or any of
its territories after the date of this Agreement, including without limitation,
any acts of terrorism, domestic or foreign or responses of the United States or
its allies, or a national or international economic or financial crisis, the
result of which there has occurred any material disruption or material adverse
change in the United State commercial credit, debt capital or commercial
mortgage-backed securities markets for a period of three or more consecutive
business days; or (iv) any limitation by any governmental, regulatory or
administrative agency or authority which prohibits the extension of credit by
banks or other lending institutions in the United States or New York in a manner
that prevents Lender from providing the Debt Financing for a period of three or
more consecutive business days, Parent shall deliver to the Company a
certificate (the "MARKET MAC NOTICE") to that effect signed by an officer of
Parent, describing in reasonable detail the nature of the Market MAC (any of the
events specified in clauses (i) through (iv) described in such Market MAC Notice
being hereinafter referred to as a "MARKET MAC"). At any time following its
receipt of the Market MAC Notice, the Company may request (by delivery of a
written notice to Parent to such effect (a "COMPANY WAIVER REQUEST")) that
34
Parent fully and irrevocably waive its right to invoke the condition set forth
in Section 7.02(d) with respect to such Market MAC. In the event that Parent
delivers to the Company a written notice that Parent waives its right to invoke
the condition set forth in Section 7.02(d) with respect to such Market MAC (a
"PARENT WAIVER NOTICE"), then such Market MAC shall cease to be a basis for
Parent or Merger Sub not consummating the Merger. In the event that Parent fails
to deliver a Parent Waiver Notice with respect to a Market MAC within the longer
of (i) seven days after Parent's receipt of the corresponding Company Waiver
Request and (ii) the number of days between the date on which Parent delivered
to the Company the corresponding Market MAC Notice and the date on which the
Company delivered to Parent the Company Waiver Request (the longer of such
periods being hereinafter referred to as the "REQUISITE RESPONSE PERIOD"), then
the Company shall be entitled to terminate the Agreement pursuant to Section
8.01(j). Notwithstanding anything to the contrary in this Section 6.08(d),
nothing shall release Parent from continuing to be obligated to use its
reasonable best efforts to obtain (i) the Debt Financing or (ii) an alternative
financing in accordance with Section 6.08(a) in the event Parent declines to
timely waive its right to invoke the condition set forth in Section 7.02(d) with
respect to a Market MAC.
SECTION 6.09. FURTHER ACTION; REASONABLE BEST EFFORTS. (a) Upon the terms
and subject to the conditions of this Agreement, each of the parties hereto
agrees to use its reasonable best efforts to (i) take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the Transactions and (ii) obtain from Governmental Authorities and third parties
any consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained by Parent or the Company or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement. Subject to appropriate confidentiality protections, each of
Parent and the Company shall have the right to review and approve in advance
drafts of all applications, notices, petitions, filings and other documents made
or prepared in connection with the items described in clauses (i) and (ii)
above, which approval shall not be unreasonably withheld or delayed, shall
cooperate with each other in connection with the making of all such filings,
shall furnish to the other party such necessary information and assistance as
such other party may reasonably request with respect to the foregoing and shall
provide the other party with copies of all filings made by such party with any
applicable Government Authority, and, upon request, any other information
supplied by such party to a Governmental Authority in connection with this
Agreement and the Transactions.
(b) Merger Sub, the Company, and Parent shall use their respective
reasonable best efforts to obtain any third party consents (i) necessary, proper
or advisable to consummate the Transactions, (ii) disclosed in the Company
Disclosure Schedule or (iii) required to prevent a Company Material Adverse
Effect from occurring prior to the Effective Time. In the event that the Company
shall fail to obtain any third party consent described above, the Company shall
use its reasonable best efforts, and shall take such actions as are reasonably
requested by Parent, to minimize any adverse effect upon the Company and Parent
and their respective businesses resulting, or which could reasonably be expected
to result, after the Effective Time, from the failure to obtain such consent.
(c) Notwithstanding anything to the contrary in this Agreement, except as
contemplated under Sections 2.06 and 6.08 or in connection with the satisfaction
of the conditions set forth in Section 7.02(f), in connection with obtaining any
approval or consent from any person (other than a Governmental Authority) with
respect to the Merger or any other Transaction, (i) without the prior written
consent of Parent which shall not be unreasonably withheld, none of the Company
or any of its Subsidiaries shall pay or commit to pay to such person whose
approval or consent is being solicited any cash or other consideration, make any
commitment or incur any liability or other obligation due to such person and
(ii) none of Parent, Merger Sub or their respective affiliates shall be required
to pay or commit to pay to such person whose approval or consent is being
solicited any cash or other consideration, make any commitment or to incur any
35
liability or other obligation. In connection with obtaining any approval or
consent from any Governmental Authority with respect to the Merger or any other
Transaction, no divestiture of assets or undertaking relating to the conduct of
business shall be made by the Company, Parent or Merger Sub or their respective
affiliates unless acceptable to Parent.
(d) The Company shall use its reasonable best efforts to (i) exercise the
purchase options granted to the Company as tenant under that certain Lease dated
as of March 31, 1996 by and between N.J. Route 46, Limited Partnership and the
Company and that certain Lease dated as of September 22, 1988 by and between
N.J. Route 46, Limited Partnership and the Company, as successor in interest to
Prime Motor Inns, Inc., and acquire fee simple title to the property commonly
known as ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ prior to the Effective Time,
(ii) exercise the purchase option granted to the Company as tenant under that
certain Agreement of Lease dated as of September 22, 2000 by and between ▇▇▇▇▇
Trout Investments, Ltd. ("▇▇▇▇▇ TROUT") and the Company and acquire in the name
of the Company, or if requested by Parent, in the name of a subsidiary of Merger
Sub, fee simple title to the property commonly known as ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, such acquisition to be consummated prior to, but to become
effective immediately after, the Effective Time, (iii) exercise the purchase
option granted to the Company as tenant under that certain Agreement of Lease
dated as of August 8, 2000 by and between ▇▇▇▇▇ Trout and the Company and
acquire in the name of the Company, or if requested by Parent, in the name of a
subsidiary of Merger Sub, fee simple title to the property commonly known as
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, such acquisition to be
consummated prior to, but to become effective immediately after, the Effective
Time, and (iv) prior to the Effective Time, obtain a "payoff letter" from New
Jersey Economic Development Authority, as lender (the "FAIRFIELD LENDER") under
the Fairfield Mortgage acknowledging that (A) any loan agreements underlying the
Fairfield Mortgage shall be terminated and (B) any and all Liens held by the
Mortgage Lender related thereto shall be released in due course subsequent to
payment.
SECTION 6.10. OBLIGATIONS OF PARENT AND MERGER SUB. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Transactions on the terms and subject to the
conditions set forth in this Agreement.
SECTION 6.11. PUBLIC ANNOUNCEMENTS. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, each of Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or any of the
Transactions, except to the extent public disclosure is required by applicable
Law or the requirements of the NYSE, in which case the issuing party shall use
its reasonable best efforts to consult with the other party before issuing any
such release or making any such public statement.
SECTION 6.12. TAXES. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding (i) any income or franchise Taxes imposed on or
assumed by the Surviving Company, and (ii) any sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and any similar
Taxes, in each case which become payable in connection with the transactions
contemplated by this Agreement. Each of Parent and the Surviving Company agrees
to assume liability for and pay any such income or franchise Taxes and any such
sales, transfer, stamp, stock transfer, value added, use, real property transfer
or gains and any similar Taxes, as well as any transfer, recording, registration
and other fees that may be imposed upon, payable or incurred in connection with
this Agreement and the Transactions.
SECTION 6.13. RESIGNATIONS. The Company shall use its reasonable best
efforts to obtain and deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation effective as of the Effective Time, of
36
those directors of the Company or any Subsidiary designated by Parent to the
Company in writing at least 10 business days prior to the Closing.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been
adopted by the requisite affirmative vote of the stockholders of the
Company in accordance with the DGCL and the Company's Certificate of
Incorporation.
(b) NO ORDER. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award which is then in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct (without giving effect to any limitation as to materiality or
Company Material Adverse Effect set forth therein except for the
limitation set forth in the first sentence of Section 3.09) as of the
Effective Time, as though made on and as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to materiality or Company Material Adverse Effect set forth
therein except for the limitation set forth in the first sentence of
Section 3.09) would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. In addition, the
representations and warranties set forth in Section 3.03 shall be true and
correct in all material respects as of the Effective Time, as though made
on and as of the Effective Time (except to the extent expressly made as of
an earlier date, in which case as of such earlier date).
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) OFFICER'S CERTIFICATE. The Company shall have delivered to
Parent a certificate, dated the date of the Closing, signed by an officer
of the Company and certifying as to the satisfaction of the conditions
specified in Sections 7.02(a) and 7.02(b).
(d) NO MARKET MAC. No Market MAC (other than any Market MAC in
respect of which Parent has previously waived its right to invoke this
Section 7.02(d)) shall have occurred after the date of this Agreement. If
any of the events specified in clauses (i) through (iv) described in the
first sentence of Section 6.08(d) has occurred for less than three
consecutive business days (without giving effect to the three consecutive
business day period already referenced with respect to the applicable
37
event in Section 6.08(d)), then Parent and Merger Sub shall not be
obligated to consummate the Merger for so long as such event is
continuing, and thereafter Parent and Merger Sub shall not be obligated to
consummate the Merger to the extent such event constitutes a Market MAC in
accordance with Section 6.08(d).
(e) DEBT OFFER. At or prior to the Effective Time, the requisite
consents specified in Section 2.06(a) of the Company Disclosure Schedule,
respectively, shall have been received under the Debt Offer and the
Company and the respective trustees shall have executed and delivered the
supplemental indenture described in Section 2.06(b) to the indenture
governing the Notes.
(f) CREDIT AGREEMENT. At or prior to the Effective Time, Canadian
Imperial Bank of Commerce, as administrative agent under the Credit
Agreement ("CIBC"), shall have provided the Company with a "payoff" letter
acknowledging that (i) the Credit Agreement shall be terminated, (ii) any
and all Liens held by CIBC related thereto shall be released and (iii) the
Company and the Subsidiaries shall be released from any and all
liabilities under the Credit Agreement and any related guaranties (other
than any obligations under any indemnification or similar provision that
survive such termination), in each case subject to repayment of the
aggregate principal amount outstanding under the Credit Agreement,
together with all interest accrued thereon and any other fees or expenses
payable thereunder in connection with such prepayment.
(g) TITLE AFFIDAVIT. The Company shall have delivered a title
insurance affidavit, dated the date of the Closing, signed by an officer
of the Company with respect to debts, Liens, parties in possession and
non-imputation in the form attached as EXHIBIT C.
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub that are qualified by materiality
shall be true and correct in all respects, and the representations and
warranties of Parent and Merger Sub contained in this Agreement that are
not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Effective Time,
as though made on and as of the Effective Time, except to the extent
expressly made as of an earlier date, in which case as of such earlier
date.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
it on or prior to the Effective Time.
(c) OFFICER'S CERTIFICATE. Parent shall have delivered to the
Company a certificate, dated the date of the Closing, signed by an officer
of Parent, certifying as to the satisfaction of the conditions specified
in Sections 7.03(a) and 7.03(b).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time by action taken or authorized by the Board of Directors of the terminating
38
party or parties, notwithstanding any requisite adoption of this Agreement and
the Transactions by the stockholders of the Company, and whether before or after
the stockholders of the Company have approved this Agreement at the Company
Stockholders' Meeting, as follows (the date of any such termination, the
"TERMINATION DATE"):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not
have occurred on or before February 18, 2005; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either Parent or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary, preliminary or
permanent) or taken any other action (including the failure to have taken
an action) which has become final and non-appealable and has the effect of
making consummation of the Merger illegal or otherwise preventing or
prohibiting consummation of the Merger;
(d) by Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (i) any of the
representations and warranties of the Company herein become untrue or
inaccurate such that Section 7.02(a) would not be satisfied, or (ii) there
has been a breach on the part of the Company of any of its covenants or
agreements herein such that Section 7.02(b) would not be satisfied, and,
in either such case, such breach (if curable) has not been cured within 30
days after notice to the Company;
(e) by the Company if the Company is not in material breach of its
obligations under this Agreement, and if (i) any of the representations
and warranties of Parent or Merger Sub herein become untrue or inaccurate
such that Section 7.03(a) would not be satisfied, or (ii) there has been a
breach on the part of Parent or Merger Sub of any of its covenants or
agreements herein such that Section 7.03(b) would not be satisfied, and,
in either such case, such breach (if curable) has not been cured within 30
days after notice to Parent;
(f) by either Parent or the Company if this Agreement shall fail to
receive the Stockholder Approval at the Company Stockholders' Meeting;
(g) by Parent if the Company Board shall have (i) effected a Change
of Board Recommendation; or (ii) recommended or approved any Acquisition
Proposal;
(h) by the Company if, prior to the adoption of this Agreement by
the Company's stockholders at the Company Stockholders' Meeting, the
Company Board shall have effected a Change in Board Recommendation in
accordance with clause (x) of the second sentence of Section 6.04(c) of
this Agreement, but only (i) after providing written notice to Parent (a
"NOTICE OF SUPERIOR PROPOSAL") advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal, and (ii) if Parent does not, within three (3) business days of
Parent's receipt of the Notice of Superior Proposal, make an offer that
the Company Board determines, in its good faith judgment (after
consultation with its advisors) to be at least as favorable to the
Company's stockholders as such Superior Proposal; PROVIDED that during
such three business day period, the Company shall negotiate in good faith
with Parent (to the extent Parent wishes to negotiate) to enable Parent to
39
make such an offer; PROVIDED, HOWEVER, that any such purported termination
pursuant to this Section 8.01(h) shall be void and of no force or effect
unless the Company concurrently with such termination pays to Parent the
Company Termination Fee and the Termination Expenses in accordance with
Section 8.03; and PROVIDED FURTHER that Parent and Merger Sub acknowledge
and agree that concurrently with such termination the Company may enter
into a definitive agreement providing for implementation of such Superior
Proposal;
(i) by the Company if, after the conditions set forth in Section
7.01, Sections 7.02(a), (b) and (d) and (in the event Parent has fully and
timely complied with its obligations under Section 2.06) Section 7.02(e)
have been satisfied and within five business days after the Company has
delivered written notice to Parent of the satisfaction of such conditions,
the Merger shall not have been consummated; or
(j) by the Company if Parent fails to deliver a Parent Waiver Notice
prior to the expiration of the Requisite Response Period with respect to
any Market MAC.
SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability under this Agreement on the part of any
party hereto (except that the indemnification and reimbursement obligations of
Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and 6.08(b), the
Guarantee referred to in Section 4.09, and the provisions of Sections 6.03(b)
and 6.08(c), this Section 8.02, Section 8.03 and Article IX shall survive any
such termination); PROVIDED, HOWEVER, that nothing herein shall relieve the
Company from liability for any willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement prior to such
termination.
SECTION 8.03. FEES AND EXPENSES. (a) Except as otherwise set forth in this
Section 8.03, all Expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, whether or not
the Merger or any other Transaction is consummated. "EXPENSES", as used in this
Agreement, shall include all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, financing
sources, hedging counterparties, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters related to the closing of the Merger and the other Transactions.
(b) The Company agrees that if this Agreement shall be terminated:
(i) by Parent pursuant to Section 8.01(d), then (A) the Company
shall pay Parent the Termination Expenses and (B) if, concurrently with
such termination or within 12 months of the Termination Date, the Company
enters into, or submits to the stockholders of the Company for adoption,
an agreement with respect to an Acquisition Proposal, or an Acquisition
Proposal is consummated, then the Company shall also pay Parent the
Company Termination Fee;
(ii) by Parent or the Company pursuant to Section 8.01(f), then (A)
the Company shall pay Parent the Termination Expenses and (B) if,
concurrently with such termination or within 12 months of the Termination
Date, the Company enters into, or submits to the stockholders of the
Company for adoption, an agreement with respect to an Acquisition
Proposal, or an Acquisition Proposal is consummated, then the Company
shall also pay Parent the Company Termination Fee;
40
(iii) by Parent pursuant to Section 8.01(g), then (so long as
neither Parent nor Merger Sub was in material breach of any of its
representations, warranties or covenants in this Agreement as of the
Termination Date) the Company shall pay Parent the Company Termination Fee
and the Termination Expenses; or
(iv) by the Company pursuant to Section 8.01(h), then the Company
shall pay Parent the Company Termination Fee and the Termination Expenses
(which Company Termination Fee and Termination Expenses shall be paid
concurrently with such termination).
(c) The Company Termination Fee shall be paid to Parent or its designee by
the Company in immediately available funds (i) concurrently with and as a
condition to the effectiveness of a termination of this Agreement by the Company
pursuant to Section 8.01(h) and (ii) within two business days after the date of
the event giving rise to the obligation to make such payment in all other
circumstances. The Termination Expenses shall be paid to Parent or its designee
by the Company in immediately available funds (i) concurrently with and as a
condition to the effectiveness of a termination of this Agreement by the Company
pursuant to Section 8.01(h) and (ii) otherwise, within two business days after
receipt by the Company of reasonable documentation with respect to such
Expenses. In no event shall the Company be required to pay under Section 8.03(b)
an amount in excess of $27,000,000.
(d) (i) For purposes of this Section 8.03, Acquisition Proposal shall have
the meaning assigned to such term in Section 6.04(f), except that references to
15% in clauses (1) and (2) of the definition thereof shall be deemed to be
references to 40% and clause (3) of the definition thereof shall be deemed
amended and replaced in its entirety by the following language "(3) any merger,
consolidation, business combination, recapitalization or other similar
transaction involving the Company pursuant to which stockholders of the Company
immediately prior to the consummation of such transaction would cease to own
directly or indirectly at least 60% of the voting power of the outstanding
securities of the Company (or of another person that directly or indirectly
would own all or substantially all the assets of the Company) immediately
following such transaction in the same proportion as they owned prior to the
consummation of such transaction".
(ii) For purposes of this Agreement, "COMPANY TERMINATION FEE" means
an amount equal to $23,000,000.
(iii) For purposes of this Agreement, "TERMINATION EXPENSES" means
an amount, not to exceed $4,000,000, equal to the reasonably documented Expenses
of Parent and Merger Sub.
(e) Parent agrees that, if the Company shall terminate this Agreement (i)
pursuant to Section 8.01(e), (ii) pursuant to Section 8.01(b) and, at the time
of such termination, the conditions set forth in Section 7.01, Sections 7.02(a),
(b) and (d) and (in the event Parent has fully and timely complied with its
obligations under Section 2.06) Section 7.02(e) have been satisfied, or (iii)
pursuant to Section 8.01(i), then Parent shall pay to the Company a fee of
$27,000,000 (the "PARENT TERMINATION FEE") in immediately available funds no
later than two business days after such termination by the Company.
(f) Each of the Company and Parent acknowledges that the agreements
contained in this Section 8.03 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall fail to pay
the Company Termination Fee or any Termination Expenses when due or Parent shall
fail to pay the Parent Termination Fee when due, the Company or the Parent, as
the case may be, shall reimburse the other party for all reasonable costs and
expenses actually incurred or accrued by such other party (including reasonable
fees and expenses of counsel) in connection with the collection under and
enforcement of this Section 8.03. Notwithstanding anything to the contrary in
this Agreement, the Company's right to receive payment of the Parent Termination
Fee pursuant to this Section 8.03 shall be the exclusive remedy of the Company
41
and the Subsidiaries for the loss suffered as a result of the failure of the
Merger and the other Transactions to be consummated, and upon payment of the
Parent Termination Fee in accordance with this Section 8.03, none of Parent,
Merger Sub or Guarantor shall have any further liability or obligation relating
to or arising out of this Agreement or the Transactions (except with respect to
the second sentence of this Section 8.03(f), indemnification and reimbursement
obligations of Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and
6.08(b) and the provisions of Section 6.03(b) and 6.08(c)).
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after the
adoption of this Agreement and the Transactions by the stockholders of the
Company, no amendment shall be made except as allowed under applicable Law. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. The failure of any party to assert any of
its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time. This Section
9.01 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing in the English language and shall
be given (a) on the date of delivery if delivered personally, (b) on the first
business day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth business day following the
date of mailing if delivered by registered or certified mail (postage prepaid,
return receipt requested) or (d) if sent by facsimile transmission, when
transmitted and receipt is confirmed. All notices hereunder shall be delivered
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.02):
if to Parent or Merger Sub:
c/o Blackstone Real Estate Partners IV L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
42
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company:
Prime Hospitality Corp.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No: 212-451-2222
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
SECTION 9.03. CERTAIN DEFINITIONS. (a) For purposes of this Agreement:
"AFFILIATE" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"BENEFICIAL OWNER", with respect to any Shares, has the meaning ascribed
to such term under Rule 13d-3(a) of the Exchange Act.
"BUSINESS DAY" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in The City of New York.
"CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"knowledge of the Company" or "Company's knowledge" means the actual
knowledge (after reasonable inquiry) of any executive officer of the Company.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving Company,
Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries, and, without
43
limiting the foregoing, includes any entity in respect of which such person,
directly or indirectly, beneficially owns 50% or more of the voting securities
or equity.
(b) The following terms have the meaning set forth in the Sections set
forth below:
Defined Term Location of Definition
------------ ----------------------
Acquisition Proposal..................................... ss. 6.04(f)(i)
Alternative Merger....................................... ss. 1.07
▇▇▇▇▇ Trout.............................................. ss. 6.09(d)
Certificate of Merger.................................... ss. 1.03
Company Board............................................ Recitals
Company Board Recommendation............................. ss. 3.19(a)
Company Common Stock..................................... Recitals
Company Disclosure Schedule.............................. Article III
Company Material Adverse Effect.......................... ss. 3.01(a)
Company Permits.......................................... ss. 3.06
Company Preferred Stock.................................. ss. 3.03(a)
Company Stock Option..................................... ss. 2.04(a)
Company Stock Option Plans............................... ss. 2.04(a)
Company Stockholders' Meeting............................ ss. 6.02
Company Termination Fee.................................. ss. 8.03(d)(iii)
Company Waiver Request................................... ss. 6.08(d)
Confidentiality Agreement................................ ss. 6.03(b)
Contract................................................. ss. 3.05(a)
Credit Agreement......................................... ss. 3.03(c)
Debt Financing........................................... ss. 4.08
Debt Offer............................................... ss. 2.06(a)
DGCL..................................................... ss. 1.01
Dissenting Shares........................................ ss. 2.05(a)
Effective Time........................................... ss. 1.03
Election Notice.......................................... ss. 1.07
Employee................................................. ss. 6.06(a)
Environmental Laws....................................... ss. 3.16(b)(i)
Environmental Permits.................................... ss. 3.16(b)(ii)
Equity Funding Letter.................................... ss. 4.08
Equity Inns Documents.................................... ss. 3.13(i)
ERISA.................................................... ss. 3.11(a)
Exchange Act............................................. ss. 3.05(b)
Exchange Fund............................................ ss. 2.02(a)
Expenses................................................. ss. 8.03(a)
Fairfield Lender......................................... ss. 6.09(d)
Fairfield Mortgage....................................... ss. 3.03(c)
Financing................................................ ss. 4.08
Franchise Agreements..................................... ss. 3.13(h)
GAAP..................................................... ss. 3.07(b)
Governmental Authority................................... ss. 3.05(b)
Ground Leased Properties................................. ss. 3.13(a)
Ground Leases............................................ ss. 3.13(a)
Guarantee................................................ ss. 4.09
Guarantor................................................ ss. 4.09
44
Hazardous Substances..................................... ss. 3.16(b)(iii)
HPT...................................................... ss. 3.13(i)
HPT Documents............................................ ss. 3.13(i)
HPT Management Agreement................................. ss. 3.13(i)
Indebtedness............................................. ss. 3.17(a)(iv)
Indemnified Parties...................................... ss. 6.05(b)
Initial Reserve Amount................................... ss. 3.13(i)
Intellectual Property.................................... ss. 3.14(b)
Investments.............................................. ss. 3.01(c)
IRS...................................................... ss. 3.11(a)
Law...................................................... ss. 3.05(a)
Leased Properties........................................ ss. 3.13(b)
Licensed Intellectual Property........................... ss. 3.14(a)
Liens ss. 3.13(a)
Loans.................................................... ss. 3.13(l)
Loan Documents........................................... ss. 3.13(l)
Management Agreements.................................... ss. 3.13(i)
Market MAC............................................... ss. 6.08(d)
Market MAC Notice........................................ ss. 6.08(d)
Material Contracts....................................... ss. 3.17(a)
Merger................................................... Recitals
Merger Consideration..................................... ss. 2.01(a)
Merger Sub............................................... Preamble
Mortgages................................................ ss. 3.03(c)
Multiemployer Plan....................................... ss. 3.11(b)
Multiple Employer Plan................................... ss. 3.11(b)
Notes.................................................... ss. 2.06(a)
Notice of Superior Proposal.............................. ss. 8.01(h)
NYSE..................................................... ss. 3.05(b)
Offer Documents.......................................... ss. 2.06(c)
Option Payment........................................... ss. 2.04(b)
Owned Intellectual Property.............................. ss. 3.14(a)
Owned Real Properties.................................... ss. 3.13(a)
Parent................................................... Preamble
Parent Termination Fee................................... ss. 8.03(e)
Parent Waiver Notice..................................... ss. 6.08(d)
Paying Agent............................................. ss. 2.02(a)
Permitted Liens.......................................... ss. 3.13(a)
Personal Property........................................ ss. 3.13(k)
Plans.................................................... ss. 3.11(a)
Properties............................................... ss. 3.13(b)
Proxy Statement.......................................... ss. 3.05(b)
Purchaser Welfare Benefit Plans.......................... ss. 6.06(d)
Representatives.......................................... ss. 6.03(a)
Requisite Response Period................................ ss. 6.08(d)
SEC...................................................... ss. 3.05(b)
Secondary Reserve Amount................................. ss. 3.13(i)
SEC Reports.............................................. ss. 3.07(a)
Section 262.............................................. ss. 2.05(a)
Securities Act........................................... ss. 3.07(a)
Shares................................................... ss. 2.01(a)
45
Space Leases............................................. ss. 3.13(b)
Stockholder Approval..................................... ss. 3.19(b)
Subsidiary............................................... ss. 3.01(a)
Superior Proposal........................................ ss. 6.04(f)(ii)
Surviving Company........................................ ss. 1.01
Tax or Taxes............................................. ss. 3.15(k)(i)
Tax Returns.............................................. ss. 3.15(k)(ii)
Termination Expenses..................................... ss. 8.03(d)(iii)
Termination Date......................................... ss. 8.01
Third Party Flag Agreements.............................. ss. 3.13(g)
Title Policies........................................... ss. 3.13(e)
Transactions............................................. ss. 3.04
UFOCs.................................................... ss. 3.07(f)
(c) When a reference is made in this Agreement to Sections, Schedules or
Exhibits, such reference shall be to a Section, Schedule or Exhibit of this
Agreement, respectively, unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement. The term "or" is not exclusive. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms. References to a person are also to its permitted successors and
assigns. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Parent,
Merger Sub and the Company each acknowledges and agrees that, except for the
representations and warranties expressly set forth in this Agreement (a) no
party makes, and has not made, any representations or warranties relating to
itself or its businesses or otherwise in connection with the Transactions, (b)
no person has been authorized by any party to make any representation or
warranty relating itself or its businesses or otherwise in connection with the
Transactions and, if made, such representation or warranty must not be relied
upon as having been authorized by such party, and (c) any estimates,
projections, predictions, data, financial information, memoranda, presentations
or any other materials or information provided or addressed to any party or any
of its Representatives are not and shall not be deemed to be or to include
representations or warranties unless any such materials or information is the
subject of any representation or warranty set forth in this Agreement.
SECTION 9.06. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the
Confidentiality Agreement and the Guarantee constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof
and supersede all prior agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof and thereof. This Agreement shall not be assigned (whether pursuant to a
merger, by operation of law or otherwise), except that Parent and Merger Sub may
46
assign all or any of their rights and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent, PROVIDED, HOWEVER, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 9.07. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.05 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.08. REMEDIES; SPECIFIC PERFORMANCE. (a) Without limiting the
right to receive any payment it may be entitled to receive under Section 8.03(e)
(including under Sections 2.06(d), 6.03(a) and 6.08(b)), the Company agrees that
to the extent it has incurred losses or damages in connection with this
Agreement the maximum aggregate liability of Parent, Merger Sub and Guarantor
for such losses or damages shall be limited to $27,000,000, and in no event
shall the Company seek to recover any money damages in excess of such amount
from Parent, Merger Sub or Guarantor or their respective Representatives and
affiliates in connection therewith.
(b) The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement were not performed by the Company in
accordance with the terms hereof and that, prior to the termination of this
Agreement pursuant to Section 8.01, Parent and Merger Sub shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity. The parties acknowledge that the Company shall not be entitled to an
injunction or injunctions to prevent breaches of this Agreement by Parent or
Merger Sub or to enforce specifically the terms and provisions of this Agreement
and that the Company's sole and exclusive remedy with respect to any such breach
shall be the remedy set forth in Section 9.08(a) and 8.03(f); PROVIDED, HOWEVER,
the Company shall be entitled to seek specific performance to prevent any breach
by Parent or Merger Sub of Sections 6.03(b) and 6.08(c).
SECTION 9.09. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in
the Delaware Court of Chancery. The parties hereto hereby (a) submit to the
exclusive jurisdiction of the Delaware Court of Chancery for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named court, that its property is exempt or immune
from attachment or execution, that the Action is brought in an inconvenient
forum, that the venue of the Action is improper, or that this Agreement or the
Transactions may not be enforced in or by the above-named court.
SECTION 9.10. WAIVER OF JURY TRIAL. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and the Transactions, as applicable, by, among other things,
the mutual waivers and certifications in this Section 9.10.
SECTION 9.11. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
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SECTION 9.12. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PRIME HOSPITALITY CORP.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
BREP IV HOTELS HOLDING L.L.C.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Managing Director and
Vice President
BREP IV HOTELS ACQUISITION L.L.C.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Managing Director and
Vice President
49